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Author Question: Worldwide Inc, a large conglomerate, has decided to acquire another firm. Analysts are ... (Read 50 times)

mynx

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on: Jul 10, 2018
Worldwide Inc, a large conglomerate, has decided to acquire another firm.
 
  Analysts are forecasting a period (2 years) of extraordinary growth (20), followed by another 2 years of unusual growth (10 ), and finally a normal (sustainable) growth rate of 6 annually. If the last dividend was D(0 ) = 1.00 per share and the required rate is 8, what should the market price be today?
  A) 93.70
  B) 72.76
  C) 99.66
  D) 98.57
  E) 68.87

Question 2

You have a choice between investing in a corporate bond or a municipal bond. The corporate bond has an
  annual yield of 10 percent, while the municipal bond has an annual yield of 7 percent.
 
  At what tax rate would
  you be indifferent between buying the corporate bond or the municipal bond?


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bubulittle310@msn.cn

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Reply #1 on: Jul 10, 2018
Answer to Question 1

B

Answer to Question 2

Before-tax equivalent yield on municipal bond = .07 (1 - tax rate)
Before-tax yield on corporate bond = .10
.10 = .07 : Tax Rate = 1 - (.07/.


mynx

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Reply 2 on: Jul 10, 2018
YES! Correct, THANKS for helping me on my review

anyusername12131

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  • Posts: 327
Reply 3 on: Yesterday
Great answer, keep it coming :)

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