You are evaluatig an equity investment in a public company called Corona Corp (ticker: COR). You expect the company will pay a $2.00 dividend per share at the end of next year and that dividends will grow at a constant rate of 5% annually in the future. You require a 13% return on investments in equity. Based on these assumptions, what is the fair value of a share of COR stock today?

$25

Explanation:

according to the constant dividend growth model

price = d1 / (r - g)

d1 = next dividend to be paid

r = cost of equity

g = growth rate

2/ 0.13 - 0.08 = $25

a naked warrant, also known as a covered warrant, is a derivative that allows the holder to buy or sell a security, such as a bond or share. unlike a normal warrant, it is not attached to a newly issued bond or preferred stock.

unsecured bonds: they are not secured by a specific asset, but rather by "the full faith and credit" of the issuer. in other words, the investor has the issuer's promise to repay but has no claim on specific collateral. debt, such as unsecured bond debt, is said to be “subordinated,” or junior, to secured debt.

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