Accounting: What the Numbers Mean 11th Edition by Wayne McManus,Daniel Viele,David Marshall

Exercise 25

Review problem-time value of money applications Use the appropriate factors from Table 6-4 or Table 6-5 to answer the following questions.
Required:
a. Spencer Co.'s common stock is expected to have a dividend of $10 per share for each of the next eight years, and it is estimated that the market value per share will be $92 at the end of eight years. If an investor requires a return on investment of 10%, what is the maximum price the investor would be willing to pay for a share of Spencer Co. common stock today?
b. Mario bought a bond with a face amount of $1,000, a stated interest rate of 7%, and a maturity date 10 years in the future for $985. The bond pays interest on an annual basis. Three years have gone by and the market interest rate is now 6%. What is the market value of the bond today?
c. Alexis purchased a U.S. Series EE savings bond for $75, and six years later received $106.38 when the bond was redeemed. What average annual return on investment did Alexis earn over the six years?
Reference Table 6-4:

Reference Table 6-5: