Fin assignment intrinsic value | Business & Finance homework help


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1. A company that is guaranteed to pay dividends can have a positive value.


2. Forecasting cash flows has no significant risks.


3. Discount rate is a synonym for coupon rate.


4. Bond prices are inversely related to their time to maturity.


8. Adam Clayton wants to sell stock to raise capital.  He plans to issue a dividend of $7.00 next year and growing at a 4% rate forever.  What is the intrinsic value of this stock if the discount rate is 8%?


9. INXS Corporation, a maker of “What You Need”, just paid a dividend of $2.00.  The dividends have a constant growth rate of 10%.  The required rate of return on this firm is 16%.  What is the intrinsic value of a share of this stock?



10. Bueller, Inc. has a 30 year bond that has existed for 10 years, a coupon rate of 10%, and a required rate of 10%.  Assuming a face value of $1000, what is the intrinsic value of the bond?  What if the required rate was 6%?  What if the required rate was 14%?


11. A new 10 year bond has a coupon rate of 25%.  The bond is nine years old and has a required rate of return of 10%.  The face value is $1000.  What is the intrinsic value of the bond?


13. A potential project has the following expected cash flows.

            t              0         1          2          3          4          5

            CF       -500     150      220      -80       360      100

Assuming a discount rate of 10% please calculate Net Present Value, Payback, and Discounted Payback


Formula Sheet






(1+r)t – 1 * CF



1 – 1/(1+r)t  * CF