If someone could show me exactly how to work these out step by step that would b

Question

If someone could show me exactly how to work these out step by step that would be great!!!!!

A.) Dividend valuation model for new public issue. The investment banking firm of Einstein & Co. will use a dividend valuation model to appraise the shares of the Modern Physics Corporation. Dividents (D1) at the end of the current year will be $1.44. The growth rate (g) is 8 percent and the discount rate (Ke) is 12 percent.
i) What should be the price of the stock to the public?
ii) If there is a 6 percent total underwriting spread on the stock, how much will the issuing corporation receive?
iii) If the issuing corporation requires a net price of $34.50 (proceeds to the corporation) and there is a 6 percent underwriting spread, what should be the price of the stock to the public?

B.) Are there any disadvantages to being a public company??

C.) Garland Corporation has a bond outstanding with a $90 annual interest payment, a market price of $820, and a maturity date in five years.. Find the:
i) Coupon rate
ii)Current rate
iii)Approximate yield to maturity

D.) In doing a five-year analysis of future dividends, the Dawson Corporation is considering the following two plans. The values represent dividends per share
Year Plan A Plan B
1.......... $1.50 $ .50
2.......... 1.50 2.00
3.......... 1.50 .20
4.......... 1.60 4.00
5.......... 1.60 1.70
i) How much in total dividends per share will be paid under each plan over the five years? Would you choose plan A or plan B?

Explanation / Answer

a) i) Price of the stock using Dividend valuation model: The formula for Dividend valuation model is Ke = (D1 / P0) + g 0.12 = ($1.44 / P0) + 0.08 0.04 = $1.44 / P0 P0 = $1.44 / 0.04 P0= $36 ii) If the underwriting spread is 6%, then the issuing corporation will receive: $36 (1 - 0.06) = $33.84 iii) Net proceeds per share = Offer price (1 - Underwriting spread) $34.50 = Offer price (1 - 0.06) Offer price = $36.7 The price at which the stock should be sold to the public is $36.7 b) Disadvantages of being public: 1) Profit sharing: If a firm is sitting on a highly successful venture, future success has to be shared with outsiders. 2) Loss of confidentiality: Going public results in loss of confidentiality in companies operations and policies. 3) Loss of control: Outsiders are often in a position to take control of the corporate management and might even fire the company founder. c) i) Coupon rate : Annual coupon payment = Coupon rate * Face value of the bond $90 = CR * $1000 CR = 0.09 or 9% ii) Current rate = Annual dollar interest paid / market price of the bond = $90 / $820 = 0.1097 or 11% iii) Calculating the YTM using excel sheet: Step1: Go to excel and click "insert" to insert the function. Step2: Select the "Rate" function as we are finding the yield to maturity in this case. Step3: Enter the values as Nper = 5; PMT = -90; PV = 820; FV= -1000 Step4: Click "OK" to get the desired value. The value comes to "14.28%" d) For Plan-A: Total dividend per share over five years = ($1.5 + $1.5 +$1.5 +$1.6 +$1.6) / 5 = $1.54 For Plan-B: Total Dividend per share for 5 years = ($0.50 + $2.00 + $0.20 + $4.00 + $1.70) / 5 = $1.68 Therefore, Plan-B is paying the highest dividend per share over the last 5 yrs.

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