Introduction to Corporate Finance
4: Valuing Bonds 4-5 THe TerM STrUCTUre OF INTereST r ATeS We now turn to an important insight about how interest rates relate t ...
PArT 2: VALUATION, rISk AND reTUrN Usually, long-term bonds offer higher yields than do short-term bonds, and the yield curve sl ...
4: Valuing Bonds the same period, the two-year bond offers just 2.5% per year or 5% total (5.06% after compounding). In this sce ...
PArT 2: VALUATION, rISk AND reTUrN yield on a long-term instrument by purchasing a short-term bond. Conversely, when the yield c ...
4: Valuing Bonds their yields. If the investors purchasing long-term bonds have a strong preference for investing in those secur ...
PArT 2: VALUATION, rISk AND reTUrN IMPOrTANT eQUATIONS 4.1 The fundamental valuation model = + + + + ⋅⋅⋅⋅+ + P CF r CF r CF (1 ) ...
4: Valuing Bonds ST4-2 A bond that matures in two years makes semiannual interest payments. Its face value is $1,000, its coupon ...
PArT 2: VALUATION, rISk AND reTUrN BOND PRICES AND INTEREST RATES P4-2 A $100 par value bond makes two interest payments each ye ...
4: Valuing Bonds d Which bond’s price is most sensitive to interest rate movements? Does this answer surprise you? Why or why no ...
PArT 2: VALUATION, rISk AND reTUrN VALUING BONDS As you browse opportunities for investment, you come across Horsham Industries, ...
VALUING SHARES 5-1 The essential features of preferred and ordinary shares 5-2 Valuing preferred and ordinary shares 5-3 The fre ...
PARt 2: VALUAtIoN, RISk ANd REtURN 5 -1 tHE ESSENtIAL FEAtURES oF PREFERREd ANd oRdINARY SHARES How do companies raise money whe ...
5: Valuing Shares make no specific promises to investors about how much cash they will receive, or when. Companies may choose to ...
PARt 2: VALUAtIoN, RISk ANd REtURN In other respects, preferred shares look more like equity than debt. Dividends on preferred a ...
5: Valuing Shares rate. To find today’s value of a preferred share, PS 0 , we use the equation for the present value of a perpet ...
PARt 2: VALUAtIoN, RISk ANd REtURN Now let’s turn our attention to the more challenging problem of using discounted cash flow te ...
5: Valuing Shares Now, take this expression for P 1 and substitute it back into Equation 5.2: = + + + = + + + P D DP r r ...
PARt 2: VALUAtIoN, RISk ANd REtURN example Hewlett-Packard (HP), the US computer giant, paid a constant quarterly dividend of US ...
5: Valuing Shares expected to grow at 4% each year, forever. If we continue to use this dividend growth model, what would have b ...
PARt 2: VALUAtIoN, RISk ANd REtURN example Suppose the rapid growth of a telecommunications company has carried the market for s ...
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