Question 1
Chapter 5 A1. (Bond valuation) A $1,000 face value bond has a remaining maturity of 10 years and a required return of 9%. The bond?s coupon rate is 7.4%. What is the fair value of this bond? A10. (Dividend discount model) Assume RHM is expected to pay a total cash dividend of $5.60 next year and its dividends are expected to grow at a rate of 6% per year forever. Assuming annual dividend payments, what is the current market value of a share of RHM stock if the required return on RHM common stock is 10%? A12. (Required return for a preferred stock) James River $3.38 preferred is selling for $45.25. The preferred dividend is nongrowing. What is the required return on James River preferred stock? A14. (Stock valuation) Suppose Toyota has nonmaturing (perpetual) preferred stock outstanding that pays a $1.00 quarterly dividend and has a required return of 12% APR (3% per quarter). What is the stock worth? B16. (Interest-rate risk) Philadelphia Electric has many bonds trading on the New York Stock Exchange. Suppose PhilEl?s bonds have identical coupon rates of 9.125% but that one issue matures in 1 year, one in 7 years, and the third in 15 years. Assume that a coupon payment was made yesterday. a. If the yield to maturity for all three bonds is 8%, what is the fair price of each bond? b. Suppose that the yield to maturity for all of these bonds changed instantaneously to 7%. What is the fair price of each bond now? c. Suppose that the yield to maturity for all of these bonds changed instantaneously again, this time to 9%. Now what is the fair price of each bond? d. Based on the fair prices at the various yields to maturity, is interest-rate risk the same, higher, or lower for longer- versus shorter-maturity bonds? B18. (Default risk) You buy a very risky bond that promises a 9.5% coupon and return of the $1,000 principal in 10 years. You pay only $500 for the bond. a. You receive the coupon payments for three years and the bond defaults. After liquidating the firm, the bondholders receive a distribution of $150 per bond at the end of 3.5 years. What is the realized return on your investment? b. The firm does far better than expected and bondholders receive all of the promised interest and principal payments. What is the realized return on your investment? B20. (Constant growth model) Medtrans is a profitable firm that is not paying a dividend on its common stock. James Weber, an analyst for A. G. Edwards, believes that Medtrans will begin paying a $1.00 per share dividend in two years and that the dividend will increase 6% annually thereafter. Bret Kimes, one of James? colleagues at the same firm, is less optimistic. Bret thinks that Medtrans will begin paying a dividend in four years, that the dividend will be $1.00, and that it will grow at 4% annually. James and Bret agree that the required return for Medtrans is 13%. a. What value would James estimate for this firm? b. What value would Bret assign to the Medtrans stock? Chapter 7 C1. (Beta and required return) The riskless return is currently 6%, and Chicago Gear has estimated the contingent returns given here. a. Calculate the expected returns on the stock market and on Chicago Gear stock. b. What is Chicago Gear?s beta? c. What is Chicago Gear?s required return according to the CAPM? State of the Market/ Probability that State Occurs/ REALIZED RETURN: Stock Market/ Chicago Gear Stagnant/ 0.20/ (10%)/ (15%) Slow growth/ 0.35/ 10/ 15 Average growth/ 0.30/ 15/ 25 Rapid growth/ 0.15/ 25/ 35,Here's the text book
Question 2
QUESTIONS 18 THROUGH 20 ARE BASED ON EXHIBIT 5-2 EXHIBIT 5-2 CHANGES IN THE BALANCE SHEET ACCOUNTS FOR MY TWO SONS COMPANY FROM 6/30/YEAR 6 TO 6/30 YEAR 7 ARE PRESENTED BELOW. INCREASE OF (DECREASE) CASH 40,000 ACCOUNTS RECEIVABLE 100,000 INVENTORY 150,000 LONG-TERM INVESTMENTS 100,000 LONG-LIVED ASSETS (100,000) ACCUMULATED DEPRECIATION (30,000) ACCOUNTS PAYABLE (20,000) MORTGAGE PAYABLE (100,000) BONDS PAYABLE 200,000 COMMON STOCK $1 PAR 150,000 ADDITIONAL PAID IN CAPITAL 50,000 RETAINED EARNINGS 40,000 ADDITIONAL INFORMATION FOR YEAR 7 ? THE BONDS WERE ISSUED FOR CASH AT FACE VALUE ? NET INCOME WAS 240,000 ? DIVIDENDS OF 200,000 WERE DECLARED AND PAID ? COMMON STOCK WAS ISSUED FOR CASH ? A LONG-TERM INVESTMENT WAS SOLD FOR $80,000 WITH NO GAIN OR LOSS ? A NEW LONG TERM INVESTMENT WAS PURCHASED FOR $180,000 ? LONG-LIVED ASSETS THAR COST $300,000 WERE SOLD FOR $100,000 THE BOOK ? VALUE OF THOSE ASSETS WAS $75,000 AT THE TIME OF SALE ? NEW LONG LIVED ASSETS WERE PURCHASED FOR CASH QUESTION #18 REFER TO EXHIBIT 5-2 THE NET CASH FLOW FROM OPERATIONS FOR YEAR 7 IS A------(HINT: ANALYZE THE CHANGE IN ACCUMULATED DEPRECIATION TO DETERMINE THE DEPRECIATION EXPENSE FOR THE YEAR.) A-100,000 INFLOW B-100,000 OUTFLOW C-140,000 INFLOW D-140,000 OUTFLOW QUESTION#19 REFER TO EXHIBIT 5-2 WHAT IS THE NET CASH FLOW INVESTING ACTIVITIES FOR YEAR 7? A-200,000 INFLOW B-200,000 OUTFLOW C-300,000 INFLOW D-300,000 OUTFLOW QUESTION #20 REFER TO EXHIBIT 5-2 WHAT IS THE NET CASH FLOW FROM FINANCING ACTIVITIES FOR YEAR7? A-100,000 INFLOW B-100,000 OUTFLOW C-200,000 INFLOW D-200,000 OUTFLOW,Just reminder these 18 through 20 are based on exhibit table 5-2. Regards,Enter your follow up question here...,Enter your follow up question here...
Question 3
Question 10 Calculate the project's IRR. Do not write the '%' sign in your answer. If the answer is 12.45%, you will enter 12.45 Year 0 1 2 3 4 Cash flows ?$1,050 $400 $400 $400 $400 Question 11 Calculate the NPV of a project that requires investment of 872 and provides the cashflows of 368, 201, 275, 326 in the next 4 years. The relevant discount rate is 11%. (All numbers are in dollars) Question 12 Find the payback period for a project that requires investment of $31 and returns $12 every years for 7 years. Question 13 How many years will it take to triple your money at 14% compounded monthly? Enter your answer rounded off to TWO decimal points. Do not enter "years" in the answer box. Suppose an investment offers to double your money in 31 years. What annual rate of return are you being offered if interest is compounded semi-annually? Note: Enter your answer in percentages rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box. ABC Company lists total assets of $4,483, current liabilities of $244 , long-term debt of $865 , and 203 shares of common stock. If the market price per share is $72, what is the market-to-book ratio? Enter your answer rounded off to two decimal points. ABC Company has total assets of $869,997. There are 41,756 shares outstanding with a market value of $32 per share. If the net profit margin is 6.4% and the total asset turnover is 1.6, what is the price/earnings (P/E) ratio? Enter your answer rounded off to two decimal points. Suppose you take a mortgage for $135,908 for 16 years with annual payments. If the annual interest rate is 3.3%, calculate the total interest amount paid over the life of the loan. That is, calculate the total interest paid in 16 years. Hint: Use the amortization table. Enter your answer rounded off to two decimal points. Do not enter $ in the answer box. Question 18 Suppose you invest $32,408. If the interest rate is 12% compounded quarterly for the first 10 years and 3% compounded monthly for the next 5 years, what is the future value after 15 years? Enter your answer rounded off to two decimal points. Do not enter $ in the answer box.
Question 4
3) Gary Bauer opens a computer consulting business called Technology Consultants and completes the following transactions in April. April 1 Bauer invested $100,000 cash along with $24,000 in office equipment in the company. 2 The company prepaid $7,200 cash for twelve months? rent for an office. (Hint: Debit Prepaid Rent for $7,200.) 3 The company made credit purchases of office equipment for $12,000 and office supplies for $2,400. Payment is due within 10 days. 6 The company completed services for a client and immediately received $2,000 cash. 9 The company completed a $8,000 project for a client, who must pay within 30 days. 13 The company paid $14,400 cash to settle the account payable created on April 3. 19 The company paid $6,000 cash for the premium on a 12-month insurance policy. (Hint: Debit Prepaid Insurance for $6,000.) 22 The company received $6,400 cash as partial payment for the work completed on April 9. 25 The company completed work for another client for $2,640 on credit. 28 Bauer withdrew $6,200 cash from the company for personal use. 29 The company purchased $800 of additional office supplies on credit. 30 The company paid $700 cash for this month?s utility bill. Prepare a trial balance as of April 30
Question 5
Please use 6-12 as a reference as well as the excel spreadsheet. I just need the simple question of 6-13 answered below. I completed 6-12 on my own.It is due today so I cannot extend it. Thank you. " 6-12. FORCASTING PRO FORMA FINANCIAL STATEMENTS: PREPARE A PRO FORMA INCOME STATEMENT AND BALANCE SHEET FOR WEBB ENTERPRISES, FOUND in problem 6-7, where revenues are expected to grow by 20% in 2011. MAKE THE FOLLOWING ASSUMPTIONS IN MAKING YOUR FORECAST OF THE FIRM?S BALANCE SHEET FOR 2011: A. The income statement expenses are a constant percent of revenues except for interest, which remains equal in dollar amount to the 2010 level, and taxes, which equal 40% of earnings before taxes. B. The cash and marketable securities balance remains equal to $500, and the remaining current asset accounts and fixed assets increase in proportion to revenues for 2010. C. Net property, plant, and equipment increase in proportion to the increase in revenues. D. Accounts payable increase in proportion to firm revenues. E. Owners? equity increases by the amount of firm net income for 2011 (no cash dividends are paid). F. Long term debt remains unchanged and short term debt changes in an amount that balances the balance sheet. 6-13. using your pro forma financial statements from problem 6-12, estimate the firm?s FCF for 2011
