Is it always better to buy term and invest the rest? Check out this comparison using Morningstar Investor Analysis comparison of actual performance of NM whole life insurance with the S & P 500 index and other investments.
Is it always better to buy term and invest the rest? Check out this comparison using Morningstar Investor Analysis comparison of actual performance of NM whole life insurance with the S & P 500 index and other investments.
10 Key principals of using evidence investing to improve your odds of success in reaching your goals. This includes embracing the market and using diversification.
The Cogent Advisor, and independent wealth manager in Chicago helping successful professionals simplify their complex financial lives and reach their goals. 312-382-8388. www.thecogentadvisor.com.
U.S. equities continued their impressive advance, with
no significant declines during the quarter. In Europe, policy changes may function as an important tailwind for growth and market performance. Globally, M&A activity has been on the rise, giving a boost to equity prices across the market-cap spectrum. The current bull market has been significant — in terms of both length and magnitude.
Signs of inflation will raise the stakes for the Fed’s policy communications. Favorable conditions for leveraged strategies could reverse quickly. Reasonable valuations and the Fed’s policy goals continue to support risk assets.
Top of Form 1.Even though most corporate bonds in the .docxamit657720
Top of Form
1.
Even though most corporate bonds in the United States make coupon payments semiannually, bonds issued elsewhere often have annual coupon payments. Suppose a German company issues a bond with a par value of €1,000, 20 years to maturity, and a coupon rate of 7.4 percent paid annually.
If the yield to maturity is 8.5 percent, what is the current price of the bond?
(Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Bond price
Even though most corporate bonds in the United States make coupon payments semiannually, bonds issued elsewhere often have annual coupon payments. Suppose a German company issues a bond with a par value of €1,000, 20 years to maturity, and a coupon rate of 7.4 percent paid annually.
If the yield to maturity is 8.5 percent, what is the current price of the bond?
(Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Bond price
€
[removed]
2.
Assuming semiannual compounding, what is the price of a zero coupon bond with 19 years to maturity paying $1,000 at maturity if the YTM is
(Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
:
Price of the Bond
a.
4 percent
b.
7 percent
c.
10 percent
References
Worksheet
Section: 8.1 Bonds and Bond Valuation
Assuming semiannual compounding, what is the price of a zero coupon bond with 19 years to maturity paying $1,000 at maturity if the YTM is
(Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
:
Price of the Bond
a.
4 percent
$
[removed]
b.
7 percent
$
[removed]
c.
10 percent
$
[removed]
3.
A Japanese company has a bond outstanding that sells for 95 percent of its ¥100,000 par value. The bond has a coupon rate of 5.4 percent paid annually and matures in 16 years.
What is the yield to maturity of this bond?
(Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Yield to maturity
%
References
Worksheet
Section: 8.1 Bonds and Bond Valuation
A Japanese company has a bond outstanding that sells for 95 percent of its ¥100,000 par value. The bond has a coupon rate of 5.4 percent paid annually and matures in 16 years.
What is the yield to maturity of this bond?
(Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Yield to maturity
[removed]
%
4.
The next dividend payment by ECY, Inc., will be $1.76 per share. The dividends are anticipated to maintain a growth rate of 7 percent, forever. The stock currently sells for $34 per share.
What is the dividend yield?
(Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Dividend yield
What is the expected capital gains yield?
(Do not round intermediate calculations and enter your answ ...
Assets
Liabilities
Total Reserves
$50,000
Demand Deposits
$180,000
U.S. Government Bonds
$110,000
Loans
$20,000
Assume the balance sheet above is for Eastlandia National Bank. The reserve requirement is 20%.
a. Given the current situation, how much money can Eastlandia National Bank lend to borrowers if it wants to keep all of its bonds?
b. Based on your answer in part (a), how much additional money can Eastlandia National Bank create? (Remember, how means how and why.)
c. Explain two reasons why the money supply may not increase by the amount you identified in part (b).
Spring 2013 Due Wed May. 15 by 4pm (my office)
1) Describe (in detail) the three forms of underwriting.
2) You want to set up an education trust for a relative starting in 2014. The trust will pay $25,000 a year starting in year 2022 and ending in year 2025. The stated annual percentage rate is 8% compounded annually.
a. How much will you have to invest in 2010 to achieve your objective?
b. How much will you have to invest each year from 2012 – 2017 to achieve your objective?
3) Samuelson Plastics has 7.5 percent preferred stock outstanding. Currently, this stock has a market value per share of $52 and a book value per share of $38. What is the cost of preferred stock?
4) Tidewater Fishing has a current beta of 1.21. The market risk premium is 8.9 percent and the risk-free rate of return is 3.2 percent. By how much will the cost of equity increase if the company expands its operations such that the company beta rises to 1.50?
5) Penn Corporation does not currently pay dividends. It is expected to begin paying dividends in year three (3) with a $2.50 dividend. This dividend is expected to grow at a rate of 14% for three years and then 6% every year after that forever. The required return on Penn’s stock is 16%. Calculate the price of Penn’s stock today.
6) Suppose Primerica has just paid a dividend of $1.75 per share. Sales and profits for Primerica are expected to grow at a rate of 5% per year. Its dividend is expected to grow by the same amount. If the required return is 12%, what is the value of a share of Primerica in 6 years?
7) IPOs typically experience underpricing. Describe (1) what is underpricing, (2) the evidence that underpricing occurs (be sure to include real world numbers/examples), and (3) why does underpricing occur.
8) Adelson's Electric had beginning long-term debt of $42,511 and ending long-term debt of $48,919. The beginning and ending total debt balances were $84,652 and $78,613, respectively. The interest paid was $4,767. What is the amount of the cash flow to creditors?
9) You arrived at work today to see the CFO, COO and most of the company’s top management team taken away in handcuffs. The only executive who was not arrested was the newly appointed CEO. Before you can even reach your cube, the CEO calls you into his office to explain some incomplete project an ...
FNCE 403v2 Assignment 3 Revised Nov. 7, 2012
Assignment 3 Details
Complete and submit Assignment 3, which is worth 15% of your final grade, after
you have finished Unit 6. If you have any questions about this assignment and how
to complete it, contact the Student Support Centre.
This assignment contains ten problems and is worth a total of 100 marks.
Read the requirements for each problem and plan your responses carefully. Ensure
that you answer each of the required questions as concisely and as completely as
possible and include supporting calculations where required.
1. (7 marks) You are a bright new analyst in the risk-management division at
RMS, a multinational technology company, and have recently been put in
charge of managing the Euro/CAD exchange-rate risk that RMS faces.
Consider RMS’s operations in Europe and Canada.
a. Suppose monthly revenues in Europe average 10 million Euros and
monthly production and distribution costs average 8 million Euro. If the
resulting profits are repatriated to the production unit in Canada monthly,
what risk does this production unit face? How might it hedge this risk?
(2 marks)
b. RMS’s worldwide retirement benefits unit is located in Canada and has the
obligation to pay its retired European employees 20 million Euros monthly.
What does this unit face and how could it hedge the risk? (2 marks)
c. Given the transactions of the production and retirement units as given
previously, what do you conclude are the exchange-rate risks faced by
RMS as a whole in Europe? Does RMS need to enter into forward
contracts? (3 marks)
2. (10 marks) Suppose the spot exchange rate between U.S. dollar and
Canadian dollar is US$1.03/C$. The U.S. dollar risk-free rate is 2% per
annum, compounded annually. The price of a two-year European call option
and put option with an exercise price of US$1.05/C$ is US$4.45 and
US$4.54, respectively. What is the Canadian dollar risk-free rate?
FNCE 403v2 Assignment 3 Revised Nov. 7, 2012
3. (10 marks) Two firms have the borrowing rates shown below.
Firm Fixed Rate Floating Rate
AAA 5 yr T-bond + 60 bp LIBOR
BBB 5 yr T-bond + 75 bp LIBOR + 30 bp
As the CFO of firm AAA, you always consider an interest rate swap before
borrowing money. Explain how, if at all, a swap with BBB would be
advantageous to you if
a. you wanted to borrow at a fixed rate. (7 marks)
b. you wanted to borrow at a floating rate. (3 marks)
4. (10 marks) A corporation enters into a $35 million notional principal plain
vanilla interest rate swap. The swap calls for the corporation to pay a fixed
rate and receive a floating rate of LIBOR. The payments will be made every
three months for one year. The term structure of LIBOR when the swap is
initiated is as follows:
Months Rate (%)
3 7.00
6 7.25
9 7.45
12 7.55
Assume all of rates are continuously compounded.
a. Determine the fixed rate on the s ...
10 Key principals of using evidence investing to improve your odds of success in reaching your goals. This includes embracing the market and using diversification.
The Cogent Advisor, and independent wealth manager in Chicago helping successful professionals simplify their complex financial lives and reach their goals. 312-382-8388. www.thecogentadvisor.com.
U.S. equities continued their impressive advance, with
no significant declines during the quarter. In Europe, policy changes may function as an important tailwind for growth and market performance. Globally, M&A activity has been on the rise, giving a boost to equity prices across the market-cap spectrum. The current bull market has been significant — in terms of both length and magnitude.
Signs of inflation will raise the stakes for the Fed’s policy communications. Favorable conditions for leveraged strategies could reverse quickly. Reasonable valuations and the Fed’s policy goals continue to support risk assets.
Top of Form 1.Even though most corporate bonds in the .docxamit657720
Top of Form
1.
Even though most corporate bonds in the United States make coupon payments semiannually, bonds issued elsewhere often have annual coupon payments. Suppose a German company issues a bond with a par value of €1,000, 20 years to maturity, and a coupon rate of 7.4 percent paid annually.
If the yield to maturity is 8.5 percent, what is the current price of the bond?
(Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Bond price
Even though most corporate bonds in the United States make coupon payments semiannually, bonds issued elsewhere often have annual coupon payments. Suppose a German company issues a bond with a par value of €1,000, 20 years to maturity, and a coupon rate of 7.4 percent paid annually.
If the yield to maturity is 8.5 percent, what is the current price of the bond?
(Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Bond price
€
[removed]
2.
Assuming semiannual compounding, what is the price of a zero coupon bond with 19 years to maturity paying $1,000 at maturity if the YTM is
(Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
:
Price of the Bond
a.
4 percent
b.
7 percent
c.
10 percent
References
Worksheet
Section: 8.1 Bonds and Bond Valuation
Assuming semiannual compounding, what is the price of a zero coupon bond with 19 years to maturity paying $1,000 at maturity if the YTM is
(Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
:
Price of the Bond
a.
4 percent
$
[removed]
b.
7 percent
$
[removed]
c.
10 percent
$
[removed]
3.
A Japanese company has a bond outstanding that sells for 95 percent of its ¥100,000 par value. The bond has a coupon rate of 5.4 percent paid annually and matures in 16 years.
What is the yield to maturity of this bond?
(Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Yield to maturity
%
References
Worksheet
Section: 8.1 Bonds and Bond Valuation
A Japanese company has a bond outstanding that sells for 95 percent of its ¥100,000 par value. The bond has a coupon rate of 5.4 percent paid annually and matures in 16 years.
What is the yield to maturity of this bond?
(Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Yield to maturity
[removed]
%
4.
The next dividend payment by ECY, Inc., will be $1.76 per share. The dividends are anticipated to maintain a growth rate of 7 percent, forever. The stock currently sells for $34 per share.
What is the dividend yield?
(Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Dividend yield
What is the expected capital gains yield?
(Do not round intermediate calculations and enter your answ ...
Assets
Liabilities
Total Reserves
$50,000
Demand Deposits
$180,000
U.S. Government Bonds
$110,000
Loans
$20,000
Assume the balance sheet above is for Eastlandia National Bank. The reserve requirement is 20%.
a. Given the current situation, how much money can Eastlandia National Bank lend to borrowers if it wants to keep all of its bonds?
b. Based on your answer in part (a), how much additional money can Eastlandia National Bank create? (Remember, how means how and why.)
c. Explain two reasons why the money supply may not increase by the amount you identified in part (b).
Spring 2013 Due Wed May. 15 by 4pm (my office)
1) Describe (in detail) the three forms of underwriting.
2) You want to set up an education trust for a relative starting in 2014. The trust will pay $25,000 a year starting in year 2022 and ending in year 2025. The stated annual percentage rate is 8% compounded annually.
a. How much will you have to invest in 2010 to achieve your objective?
b. How much will you have to invest each year from 2012 – 2017 to achieve your objective?
3) Samuelson Plastics has 7.5 percent preferred stock outstanding. Currently, this stock has a market value per share of $52 and a book value per share of $38. What is the cost of preferred stock?
4) Tidewater Fishing has a current beta of 1.21. The market risk premium is 8.9 percent and the risk-free rate of return is 3.2 percent. By how much will the cost of equity increase if the company expands its operations such that the company beta rises to 1.50?
5) Penn Corporation does not currently pay dividends. It is expected to begin paying dividends in year three (3) with a $2.50 dividend. This dividend is expected to grow at a rate of 14% for three years and then 6% every year after that forever. The required return on Penn’s stock is 16%. Calculate the price of Penn’s stock today.
6) Suppose Primerica has just paid a dividend of $1.75 per share. Sales and profits for Primerica are expected to grow at a rate of 5% per year. Its dividend is expected to grow by the same amount. If the required return is 12%, what is the value of a share of Primerica in 6 years?
7) IPOs typically experience underpricing. Describe (1) what is underpricing, (2) the evidence that underpricing occurs (be sure to include real world numbers/examples), and (3) why does underpricing occur.
8) Adelson's Electric had beginning long-term debt of $42,511 and ending long-term debt of $48,919. The beginning and ending total debt balances were $84,652 and $78,613, respectively. The interest paid was $4,767. What is the amount of the cash flow to creditors?
9) You arrived at work today to see the CFO, COO and most of the company’s top management team taken away in handcuffs. The only executive who was not arrested was the newly appointed CEO. Before you can even reach your cube, the CEO calls you into his office to explain some incomplete project an ...
FNCE 403v2 Assignment 3 Revised Nov. 7, 2012
Assignment 3 Details
Complete and submit Assignment 3, which is worth 15% of your final grade, after
you have finished Unit 6. If you have any questions about this assignment and how
to complete it, contact the Student Support Centre.
This assignment contains ten problems and is worth a total of 100 marks.
Read the requirements for each problem and plan your responses carefully. Ensure
that you answer each of the required questions as concisely and as completely as
possible and include supporting calculations where required.
1. (7 marks) You are a bright new analyst in the risk-management division at
RMS, a multinational technology company, and have recently been put in
charge of managing the Euro/CAD exchange-rate risk that RMS faces.
Consider RMS’s operations in Europe and Canada.
a. Suppose monthly revenues in Europe average 10 million Euros and
monthly production and distribution costs average 8 million Euro. If the
resulting profits are repatriated to the production unit in Canada monthly,
what risk does this production unit face? How might it hedge this risk?
(2 marks)
b. RMS’s worldwide retirement benefits unit is located in Canada and has the
obligation to pay its retired European employees 20 million Euros monthly.
What does this unit face and how could it hedge the risk? (2 marks)
c. Given the transactions of the production and retirement units as given
previously, what do you conclude are the exchange-rate risks faced by
RMS as a whole in Europe? Does RMS need to enter into forward
contracts? (3 marks)
2. (10 marks) Suppose the spot exchange rate between U.S. dollar and
Canadian dollar is US$1.03/C$. The U.S. dollar risk-free rate is 2% per
annum, compounded annually. The price of a two-year European call option
and put option with an exercise price of US$1.05/C$ is US$4.45 and
US$4.54, respectively. What is the Canadian dollar risk-free rate?
FNCE 403v2 Assignment 3 Revised Nov. 7, 2012
3. (10 marks) Two firms have the borrowing rates shown below.
Firm Fixed Rate Floating Rate
AAA 5 yr T-bond + 60 bp LIBOR
BBB 5 yr T-bond + 75 bp LIBOR + 30 bp
As the CFO of firm AAA, you always consider an interest rate swap before
borrowing money. Explain how, if at all, a swap with BBB would be
advantageous to you if
a. you wanted to borrow at a fixed rate. (7 marks)
b. you wanted to borrow at a floating rate. (3 marks)
4. (10 marks) A corporation enters into a $35 million notional principal plain
vanilla interest rate swap. The swap calls for the corporation to pay a fixed
rate and receive a floating rate of LIBOR. The payments will be made every
three months for one year. The term structure of LIBOR when the swap is
initiated is as follows:
Months Rate (%)
3 7.00
6 7.25
9 7.45
12 7.55
Assume all of rates are continuously compounded.
a. Determine the fixed rate on the s ...
The risk-free rate, kRF, is 3.6 percent and the market risk premiu.docxssusera34210
The risk-free rate, kRF, is 3.6 percent and the market risk premium, (kM - kRF), is 5 percent. Assume that required returns are based on the CAPM. Your $1 million portfolio consists of $ 206 ,000 invested in a stock that has a beta of 1.3 and the remainder invested in a stock that has a beta of 0.5 . What is the required return on this portfolio? Enter your answer to the nearest .1%. Do not use the % sign in your answer, thus 12.1% is 12. 1 rather than 12.1 or .121.
Your Answer:
Question 2 options:
Answer
Question 3 (3.9 points)
Jenni Company has a total debt to total assets ratio of 45% and a current ratio of 4.1. The firm's stock sells for $ 119.4 per share. The total market value of the equity is $ 5.7 million. The market-to-book ratio is 5.7 . What is the book value per share? Show your answer to the nearest $.01. Do not use the $ symbol in your answer, thus if your answer is $2.80 enter 2.80.
Your Answer:
Question 3 options:
Answer
Question 4 (3.9 points)
Thompson Inc.'s latest EPS was $3.50, its book value per share was $22.75, it had 215,000 shares outstanding, and its debt-to-assets ratio was 46%. How much debt was outstanding?
Question 4 options:
$3,393,738
$3,572,356
$3,958,289
$4,166,620
Question 5 (3.9 points)
You have just taken out a 10-year, $12,075 loan to purchase a new car. This loan is to be repaid in 120 equal end-of-month installments. If each of the monthly installments is $150, what is the effective annual interest rate on this car loan?
Question 5 options:
6.5431%
7.8942%
8.544%
8.8871%
9.0438%
Question 6 (3.9 points)
A fixed coupon bond with par value of $1,000 has a coupon of 8%, semiannually payable. The current annual nominal market interest rate (i.e., yield to maturity) for this bond is 6%. Therefore the bond is selling ……….. and the bond's current yield is ………..
Question 6 options:
at a premium; greater than 8%
at par value; at 8%
at a premium; less than 8%
at a discount; greater than 8%
at a discount; less than 8%
Question 7 (3.9 points)
2 years ago an investor purchased a 4% semi-annual compounding coupon bond with a remaining maturity of 20 years at a price of (at that time) 90% of par. Today, i.e. two years after the purchase, the investor realizes that the bond has exactly the same price like it had two years ago (i.e. 90%). Based on this information, which of the following answers is correct:
Question 7 options:
The YTM of the 4% Bond today is the same like two years ago.
Overall, the profit for the investor from this investment over the two years is Zero.
Over the remaining life of the bond, the value of the principal exceeds the value of the coupons.
If the investor held the 4% coupon bond until maturity, the overall return from this investment over the 18 years would be 100% minus 90%, i.e. 10%.
None of the above answers is correct.
Question 8 (3.9 points)
Consider the following information and then calculate the required rate of return for the Universal Investment Fund, whi ...
Season’s Republic Inc. has a bond outstanding. This bond has a.docxkenjordan97598
Season’s Republic Inc. has a bond outstanding. This bond has a 9.5% coupon paid semiannually, and is selling in the
market for $913.00 with 6 years remaining to maturity. What is the bond’s YTM?
a. 10.92%
b. 11.55%
c. 11.73%
d. 11.80%
XYZ Promotions Corporation has a bond outstanding with a market price of $1,136.00. The bond has 4.5 years to
maturity, pays interest semiannually, and has a yield to maturity of 9.47%. What is the bond’s coupon rate?
a. 13.70%
b. 13.62%
c. 13.25%
d. 13.02%
Use the following information to answer this question and the next question.
The Bozo Company has an 8% coupon bond outstanding. The bond makes semiannual coupon payments and has 12
years remaining to maturity. Its market price is $846.64. It is issuing a new 20-year bond to finance a factory to
make new Bozos. The new bond will make annual coupon payments.
What is the yield to maturity of the Bozo Company’s existing bonds?
a. 9.50%
b. 10.00%
c. 10.25%
d. 10.50%
What coupon rate should be set for the new bonds of the Bozo Company for these bonds to sell at par?
a. 9.50%
b. 10.00%
c. 10.25%
d. 10.50%
The XYZ Company bond has a bond outstanding that has 10 years remaining to maturity. The bond has a coupon
rate of 10.50 percent, paid quarterly. If the yield to maturity is 12.0 percent, what is the market value of this bond?
a. $915.25
b. $913.32
c. $1,092.18
d. $1,000.00
Use the following information to answer this question and question 7.
Bonds of RAR Foods are selling in the market for $854.66. These bonds carry a 9 percent coupon paid
semiannually, and have 15 years remaining to maturity.
What is the bond’s yield to maturity?
a. 10.62%
b. 11.00%
c. 9.25%
d. 10.00%
What is the capital gain yield assuming that the interest rates will remain constant over the year?
a. 0.682%
b. 0.169%
c. 0.000%
d. 0.482%
Use the following information to answer this question and question 9.
Bonds of Orange Computers and Peach Computers are identical in all respect, including risk class. The only
difference is that they have different coupon. Orange Computer bond has a semiannual coupon of $47.50 and Peach
Computers bond has a semiannual coupon of $40.00. Both bonds have 8 years to maturity. The Orange Computer
bond is selling in the market for $1,151.18.
What is the yield to maturity of Orange Computers bond?
a. 7.5%
b. 9.0%
c. 8.5%
d. 7.0%
What is the price of Peach Computers bond?
a. $1,060.47
b. $1,052.82
c. $ 818.59
d. $1,037.86
Desi Inc. has a bond outstanding with 8 percent coupon, paid semiannually, and 15 years to maturity. The market
price of the bond is $1,091.96. If due to changes in market condition the market required rate of return suddenly
increases by 2%, what will be the percent change in the market price of the bond?
a. 15.88%
b. –18.88%
.
1.Which of the following is considered a hybrid organizational for.docxhyacinthshackley2629
1.Which of the following is considered a hybrid organizational form?
Corporation
limited liability partnership
sole proprietorship
partnership
3. Teakap, Inc., has current assets of $ 1,456,312 and total assets of $4,812,369 for the year ending September 30, 2006. It also has current liabilities of $1,041,012, common equity of $1,500,000, and retained earnings of $1,468,347. How much long-term debt does the firm have?
$1,844,022
$2,303,010
$2,123,612
$803,010
5. Efficiency ratio: Gateway Corp. has an inventory turnover ratio of 5.6. What is the firm's days's sales in inventory?
61.7 days
57.9 days
65.2 days
64.3 days
6. Leverage ratio: Your firm has an equity multiplier of 2.47. What is its debt-to-equity ratio?
1.74
0
0.60
1.47
8. Present value: Jack Robbins is saving for a new car. He needs to have $ 21,000 for the car in three years. How much will he have to invest today in an account paying 8 percent annually to achieve his target? (Round to nearest dollar.)
$22,680
$26,454
$16,670
$19,444
9. PV of multiple cash flows: Ferris, Inc., has borrowed from their bank at a rate of 8 percent and will repay the loan with interest over the next five years. Their scheduled payments, starting at the end of the year are as follows—$450,000, $560,000, $750,000, $875,000, and $1,000,000. What is the present value of these payments? (Round to the nearest dollar.)
$2,735,200
$2,615,432
$2,431,224
$2,815,885
10. PV of multiple cash flows: Ajax Corp. is expecting the following cash flows—$79,000, $112,000, $164,000, $84,000, and $242,000—over the next five years. If the company's opportunity cost is 15 percent, what is the present value of these cash flows? (Round to the nearest dollar.)
$480,906
$414,322
$477,235
$429,560
11. Future value of an annuity: Jayadev Athreya has started on his first job. He plans to start saving for retirement early. He will invest $5,000 at the end of each year for the next 45 years in a fund that will earn a return of 10 percent. How much will Jayadev have at the end of 45 years? (Round to the nearest dollar.)
$3,594,524
$5,233,442
$1,745,600
$2,667,904
12. Serox stock was selling for $20 two years ago. The stock sold for $25 one year ago, and it is currently selling for $28. Serox pays a $1.10 dividend per year. What was the rate of return for owning Serox in the most recent year? (Round to the nearest percent.)
40%
12%
16%
32%
13. Bond price: Regatta, Inc., has six-year bonds outstanding that pay a 8.25 percent coupon rate. Investors buying the bond today can expect to earn a yield to maturity of 6.875 percent. What should the company's bonds be priced at today? Assume annual coupon payments. (Round to the nearest dollar.)
$1,066
$923
$972
$1,014
14. PV of dividends: Next year Jenkins Traders will pay a dividend of $3.00. It expects to increase its dividend by $0.25 in each of the following three years. If their required rate of return is 14 percent, what is the present value of their dividends over the ne.
1. Nicks Enchiladas Incorporated has preferred stock outstand.docxjackiewalcutt
1. Nick's Enchiladas Incorporated has preferred stock outstanding that pays a dividend of $5 at
the end of each year. The preferred stock sells for $35 a share. What is the stock's required rate of
return? Round the answer to two decimal places.
%
2. A stock is expected to pay a year-end dividend of $2.00, i.e., D1 = $2.00. The dividend is
expected to decline at a rate of 5% a year forever (g = −5%). If the company is in equilibrium and
its expected and required rate of return is 15%, which of the following statements is CORRECT?
a. The company's dividend yield 5 years from now is expected to be 10%.
b. The company's current stock price is $20.
c. The company's expected capital gains yield is 5%.
d. The constant growth model cannot be used because the growth rate is negative.
e. The company's expected stock price at the beginning of next year is $9.50.
3. The expected return on Natter Corporation's stock is 14%. The stock's dividend is expected to
grow at a constant rate of 8%, and it currently sells for $50 a share. Which of the following
statements is CORRECT?
a. The stock's dividend yield is 7%.
b. The current dividend per share is $4.00.
c. The stock's dividend yield is 8%.
d. The stock price is expected to be $54 a share one year from now.
e. The stock price is expected to be $57 a share one year from now.
4. Investors require a 16% rate of return on Brooks Sisters' stock (rs = 16%).
a. What would the value of Brooks's stock be if the previous dividend was D0 = $2.75 and if
investors expect dividends to grow at a constant compound annual rate of (1) - 4%, (2)
0%, (3) 7%, or (4) 10%? Round your answers to the nearest cent.
1. $
2. $
3. $
4. $
b. Using data from part a, what is the Gordon (constant growth) model's value for Brooks
Sisters's stock if the required rate of return is 16% and the expected growth rate is (1)
16% or (2) 24%? Are these reasonable results? Explain.
1. (Yes or No)
2. (Yes or No)
c. Is it reasonable to expect that a constant growth stock would have g > rs? ( Yes or No)
5. Brushy Mountain Mining Company's ore reserves are being depleted, so its sales are falling.
Also, its pit is getting deeper each year, so its costs are rising. As a result, the company's earnings
and dividends are declining at the constant rate of 6% per year. If D0 = $3 and rs = 13%, what is
the value of Brushy Mountain Mining's stock? Round your answer to the nearest cent.
$
6. Boehm Incorporated is expected to pay a $3.70 per share dividend at the end of this year (i.e.,
D1 = $3.70). The dividend is expected to grow at a constant rate of 10% a year. The required rate
of return on the stock, rs, is 18%. What is the value per share of the company's stock? Round your
answer to the nearest cent.
$
7. A company currently pays a dividend of $1.5 per share, D0 = 1.5. It is estimated that the
comp ...
Fin 401 Effective Communication / snaptutorial.comHarrisGeorg18
By monday, February 23, 2015 solve the problem below, calculate the ratios, interpret the results against the industry average, and fill in the table on the worksheet. Then, provide an analysis of how those results can be used by the business to improve its performance.
Balance Sheet as of December 31, 2010
Gary and Company
Cash $45 Accounts payables $45
Receivables 66 Notes payables 45
Inventory 159 Other current liabilities 21
Marketable securities 33 Total current liabilities $111
Total current assets $303
Fin 401 Enhance teaching-snaptutorial.comrobertleew16
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By monday, February 23, 2015 solve the problem below, calculate the ratios, interpret the results against the industry average, and fill in the table on the worksheet. Then, provide an analysis of how those results can be used by the business to improve its performance.
Balance Sheet as of December 31, 2010
Gary and Company
Cash $45 Accounts payables $45
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By monday, February 23, 2015 solve the problem below, calculate the ratios, interpret the results against the industry average, and fill in the table on the worksheet. Then, provide an analysis of how those results can be used by the business to improve its performance.
Balance Sheet as of December 31, 2010
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By monday, February 23, 2015 solve the problem below, calculate the ratios, interpret the results against the industry average, and fill in the table on the worksheet. Then, provide an analysis of how those results can be used by the business to improve its performance.
Balance Sheet as of December 31, 2010
Gary and Company
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By monday, February 23, 2015 solve the problem below, calculate the ratios, interpret the results against the industry average, and fill in the table on the worksheet. Then, provide an analysis of how those results can be used by the business to improve its performance.
Balance Sheet as of December 31, 2010
Gary and Company
Cash $45 Accounts payables $45
Receivables 66 Notes payables 45
Inventory 159 Other current liabilities 21
Marketable securities 33 Total current liabilities $111
Total current assets $303
Net fixed assets 147 Long Term Liabilities
Total Assets $450 Long-term debt 24
8.value1.00 pointsAmerican Health Systems currently has 6.docxalinainglis
8.
value:
1.00 points
American Health Systems currently has 6,400,000 shares of stock outstanding and will report earnings of $13 million in the current year. The company is considering the issuance of 1,500,000 additional shares that will net $60 per share to the corporation.
a.
What is the immediate dilution potential for this new stock issue? (Do not round intermediate calculations and round your answer to 2 decimal places.)
Dilution
$ per share
b-1.
Assume that American Health Systems can earn 8 percent on the proceeds of the stock issue in time to include them in the current year’s results. Calculate earnings per share. (Do not round intermediate calculations and round your answer to 2 decimal places.)
Earnings per share
$
b-2.
Should the new issue be undertaken based on earnings per share?
Yes
No
9.
value:
1.00 points
Assume Sybase Software is thinking about three different size offerings for issuance of additional shares.
Size of Offer
Public Price
Net to Corporation
a.
$
2.4
million
$
46
$
42.60
b.
7.0
million
46
43.20
c.
28.0
million
46
43.50
What is the percentage underwriting spread for each size offer? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.)
Size of Offer
Underwriting Spread
a.
$2.4 million
%
b.
$7.0 million
%
c.
$28.0 million
%
0.
value:
2.00 points
The Wrigley Corporation needs to raise $35 million. The investment banking firm of Tinkers, Evers, & Chance will handle the transaction.
a.
If stock is utilized, 2,200,000 shares will be sold to the public at $17.20 per share. The corporation will receive a net price of $16.00 per share. What is the percentage underwriting spread per share?(Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
Underwriting spread per share
%
b.
If bonds are utilized, slightly over 35,200 bonds will be sold to the public at $1,006 per bond. The corporation will receive a net price of $993 per bond. What is the percentage of underwriting spread per bond? (Relate the dollar spread to the public price.) (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
Underwriting spread per bond
%
c-1.
Which alternative has the larger percentage of spread?
Stock
Bond
c-2.
Is this the normal relationship between the two types of issues?
Yes
No
11.
value:
2.00 points
Kevin’s Bacon Company Inc. has earnings of $5 million with 2,400,000 shares outstanding before a public distribution. Five hundred thousand shares will be included in the sale, of which 300,000 are new corporate shares, and 200,000 are shares currently owned by Ann Fry, the founder and CEO. The 200,000 shares that Ann is selling are referred to as a secondary offering and all proceeds will go to her.
The net price from the offering will be $18.50 and the corporate proceeds a.
1.Which of the following is considered a hybrid organizational for.docxelliotkimberlee
1.Which of the following is considered a hybrid organizational form?
Corporation
limited liability partnership
sole proprietorship
partnership
3. Teakap, Inc., has current assets of $ 1,456,312 and total assets of $4,812,369 for the year ending September 30, 2006. It also has current liabilities of $1,041,012, common equity of $1,500,000, and retained earnings of $1,468,347. How much long-term debt does the firm have?
$1,844,022
$2,303,010
$2,123,612
$803,010
5. Efficiency ratio: Gateway Corp. has an inventory turnover ratio of 5.6. What is the firm's days's sales in inventory?
61.7 days
57.9 days
65.2 days
64.3 days
6. Leverage ratio: Your firm has an equity multiplier of 2.47. What is its debt-to-equity ratio?
1.74
0
0.60
1.47
8. Present value: Jack Robbins is saving for a new car. He needs to have $ 21,000 for the car in three years. How much will he have to invest today in an account paying 8 percent annually to achieve his target? (Round to nearest dollar.)
$22,680
$26,454
$16,670
$19,444
9. PV of multiple cash flows: Ferris, Inc., has borrowed from their bank at a rate of 8 percent and will repay the loan with interest over the next five years. Their scheduled payments, starting at the end of the year are as follows—$450,000, $560,000, $750,000, $875,000, and $1,000,000. What is the present value of these payments? (Round to the nearest dollar.)
$2,735,200
$2,615,432
$2,431,224
$2,815,885
10. PV of multiple cash flows: Ajax Corp. is expecting the following cash flows—$79,000, $112,000, $164,000, $84,000, and $242,000—over the next five years. If the company's opportunity cost is 15 percent, what is the present value of these cash flows? (Round to the nearest dollar.)
$480,906
$414,322
$477,235
$429,560
11. Future value of an annuity: Jayadev Athreya has started on his first job. He plans to start saving for retirement early. He will invest $5,000 at the end of each year for the next 45 years in a fund that will earn a return of 10 percent. How much will Jayadev have at the end of 45 years? (Round to the nearest dollar.)
$3,594,524
$5,233,442
$1,745,600
$2,667,904
12. Serox stock was selling for $20 two years ago. The stock sold for $25 one year ago, and it is currently selling for $28. Serox pays a $1.10 dividend per year. What was the rate of return for owning Serox in the most recent year? (Round to the nearest percent.)
40%
12%
16%
32%
13. Bond price: Regatta, Inc., has six-year bonds outstanding that pay a 8.25 percent coupon rate. Investors buying the bond today can expect to earn a yield to maturity of 6.875 percent. What should the company's bonds be priced at today? Assume annual coupon payments. (Round to the nearest dollar.)
$1,066
$923
$972
$1,014
14. PV of dividends: Next year Jenkins Traders will pay a dividend of $3.00. It expects to increase its dividend by $0.25 in each of the following three years. If their required rate of return is 14 pe.
Fin 401 Teaching Effectively--tutorialrank.comSoaps108
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By monday, February 23, 2015 solve the problem below, calculate the ratios, interpret the results against the industry average, and fill in the table on the worksheet. Then, provide an analysis of how those results can be used by the business to improve its performance.
Balance Sheet as of December 31, 2010
Gary and Company
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1. UOP FIN 571 Week 4 Connect Problems NEW
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Q-1
Even though most corporate bonds in the United States make
coupon payments semiannually, bonds issued elsewhere often
have annual coupon payments. Suppose a German company
issues a bond with a par value of €1,000, 20 years to maturity,
and a coupon rate of 7 percent paid annually.
If the yield to maturity is 8.1 percent, what is the current price
of the bond? (Do not round intermediate calculations and
round your answer to 2 decimal places, e.g., 32.16.)
Q-1 (Set 2)
Watters Umbrella Corp. issued 30-year bonds 2 years ago at a
coupon rate of 7.4 percent. The bonds make semiannual
payments. If these bonds currently sell for 83 percent of par
value, what is the YTM? (Do not round intermediate
calculations and enter your answer as a percent rounded to 2
decimal places, e.g., 32.16.)
2. 2.Microhard has issued a bond with the following
characteristics:
Par: $1,000
Time to maturity: 15 years
Coupon rate: 11 percent
Semiannual payments
Calculate the price of this bond if the YTM is (Do not round
intermediate calculations and round your answers to 2 decimal
places, e.g., 32.16.):
Q-2 (Set 2)
Union Local School District has bonds outstanding with a
coupon rate of 3.7 percent paid semiannually and 15 years to
maturity. The yield to maturity on these bonds is 4.3 percent
and the bonds have a par value of $5,000.
What is the dollar price of the bond? (Do not round
intermediate calculations and round your answer to 2 decimal
places, e.g., 32.16.)
Q-3 (Set 1)
Yan Yan Corp. has a $2,000 par value bond outstanding with a
coupon rate of 5.5 percent paid semiannually and 16 years to
maturity. The yield to maturity of the bond is 5.8 percent.
What is the dollar price of the bond? (Do not round
3. intermediate calculations and round your answer to 2 decimal
places, e.g., 32.16.)
Q-3 (Set 2)
A Japanese company has a bond outstanding that sells for 90
percent of its ¥100,000 par value. The bond has a coupon rate
of 5.7 percent paid annually and matures in 19 years.
What is the yield to maturity of this bond? (Do not round
intermediate calculations and enter your answer as a percent
rounded to 2 decimal places, e.g., 32.16.)
Q-3(Set 3)
Even though most corporate bonds in the United States make
coupon payments semiannually, bonds issued elsewhere often
have annual coupon payments. Suppose a German company
issues a bond with a par value of ? 1000, 25 years to maturity,
and a coupon rate of 6.4 percent paid annually. If the yield to
maturity is 7.5 percent, what is the current price of the bond?
Q-4 (Set 1)
The next dividend payment by ECY, Inc., will be $1.96 per share.
The dividends are anticipated to maintain a growth rate of 4
percent, forever. The stock currently sells for $39 per share.
What is the dividend yield? (Do not round intermediate
calculations and enter your answer as a percent rounded to 2
decimal places, e.g., 32.16.)
Dividend yield %
What is the expected capital gains yield? (Do not round
intermediate calculations and enter your answer as a percent
4. rounded to 2 decimal places, e.g., 32.16.)
Capital gains yield %
Q-4 (Set 2)
4.Schiller Corporation will pay a $3.14 per share dividend next
year. The company pledges to increase its dividend by 5
percent per year, indefinitely. If you require a return of 12
percent on your investment, how much will you pay for the
company’s stock today? (Do not round intermediate
calculations and round your answer to 2 decimal places, e.g.,
32.16.)
5. Siblings, Inc., is expected to maintain a constant 3.6 percent
growth rate in its dividends, indefinitely. The company has a
dividend yield of 5.4 percent.
What is the required return on the company's stock? (Do not
round intermediate calculations and enter your answer as a
percent rounded to 2 decimal places, e.g., 32.16.)
Required return %
5. (Set 2) The next dividend payment by ECY, Inc., will be $1.60
per share. The dividends are anticipated to maintain a growth
rate of 6 percent, forever. The stock currently sells for $30 per
share.
What is the required return? (Do not round intermediate
calculations and enter your answer as a percent rounded to 2
decimal places, e.g., 32.16.)
5. Q-6 (Set 1)
Ayden, Inc., has an issue of preferred stock outstanding that
pays a dividend of $6.75 every year, in perpetuity. This issue
currently sells for $93 per share.
What is the required return? (Do not round intermediate
calculations and enter your answer as a percent rounded to 2
decimal places, e.g., 32.16.)
Q-6 (Set 2)
6. The Starr Co. just paid a dividend of $1.55 per share on its
stock. The dividends are expected to grow at a constant rate of
6 percent per year, indefinitely. Investors require a return of
14 percent on the stock.
What is the current price? (Do not round intermediate
calculations and round your answer to 2 decimal places, e.g.,
32.16.)
What will the price be in three years? (Do not round
intermediate calculations and round your answer to 2 decimal
places, e.g., 32.16.)
What will the price be in 7 years? (Do not round intermediate
calculations and round your answer to 2 decimal places, e.g.,
32.16.)
7. Zoom stock has a beta of 1.46. The risk-free rate of return is
3.07 percent and the market rate of return is 11.81 percent.
What is the amount of the risk premium on Zoom stock?
8. The risk premium for an individual security is computed by:
6. 9. The risk-free rate of return is 3.68 percent and the market
risk premium is 7.84 percent. What is the expected rate of
return on a stock with a beta of 1.32?
10. Mullineaux Corporation has a target capital structure of 70
percent common stock and 30 percent debt. Its cost of equity is
18 percent, and the cost of debt is 6 percent. The relevant tax
rate is 30 percent.
What is the company’s WACC? (Do not round intermediate
calculations and enter your answer as a percent rounded to 2
decimal places, e.g., 32.16.)
Question 10 Set 2
Central Systems, Inc. desires a weighted average cost of capital
of 9 percent. The firm has an after-tax cost of debt of 5 percent
and a cost of equity of 12 percent. What debt-equity ratio is
needed for the firm to achieve its targeted weighted average
cost of capital?
11.Miller Manufacturing has a target debt–equity ratio of .55.
Its cost of equity is 14 percent, and its cost of debt is 9 percent.
If the tax rate is 40 percent, what is the company’s WACC? (Do
not round intermediate calculations and enter your answer as a
percent rounded to 2 decimal places,
12.Filer Manufacturing has 4 million shares of common stock
outstanding. The current share price is $76, and the book value
per share is $5. The company also has two bond issues
outstanding. The first bond issue has a face value $90 million, a
coupon of 5 percent, and sells for 94 percent of par. The second
7. issue has a face value of $70 million, a coupon of 6 percent, and
sells for 104 percent of par. The first issue matures in 20 years,
the second in 3 years.
a. What are the company's capital structure weights on a book
value basis? (Do not round intermediate calculations and
round your answers to 4 decimal places, e.g., 32.1616.)
b. What are the company's capital structure weights on a
market value basis? (Do not round intermediate calculations
and round your answers to 4 decimal places, e.g., 32.1616.)
c. Which are more relevant?
13. Titan Mining Corporation has 8.9 million shares of common
stock outstanding and 330,000 5 percent semiannual bonds
outstanding, par value $1,000 each. The common stock
currently sells for $37 per share and has a beta of 1.45, and the
bonds have 15 years to maturity and sell for 118 percent of par.
The market risk premium is 7.7 percent, T-bills are yielding 4
percent, and the company’s tax rate is 40 percent.