# Diane Carter is interested in buying a five-year zero coupon bond

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Get college assignment help at uniessay writers Diane Carter is interested in buying a five-year zero coupon bond whose face value is \$1,000. She understands that the market interest rate for similar investments is 9 percent. Assuming annual compounding, the current price of this bond is

## KatyDid Clothes has a \$141 million (face value) 17-year bond issue

KatyDid Clothes has a \$141 million (face value) 17-year bond issue selling for 106 percent of par that carries a coupon rate of 10 percent, paid semiannually.

## Which of the following statements is most correct? a. Downward sloping

Which of the following statements is most correct? a. Downward sloping yield curves are inconsistent with the expectations theory. b. Upward sloping yield curves are inconsistent with the expectations theory. c. If the expectations theory is correct, a downward sloping yield curve indicates that interest rates are expected to decline in the future. d. Answers a and c are correct. e. None of the statements above is correct.

## The federal government sometimes taxes dividends and capital gains at different

The federal government sometimes taxes dividends and capital gains at different rates. Other things held constant, if the tax rate on dividends is high relative to that on capital gains, then individuals with low taxable incomes should favor stocks with low payouts and high-income individuals should favor high-payout companies. a. True b. False

## Break-even point). You are a hard working analyst in the office

Break-even point). You are a hard working analyst in the office of financial operations for a manufacturing firm that produces a single product. You have developed the following cost structure information for this company. All of it pertains to an output level of ten million units. Using this information, find the break-even point in units of output for the firm. Return on operating assets = 25% Operating asset turnover = 5 times Operating Assets = \$20 million Degree of Operating leverage = 4 times

## NOrthern Manufacturing is interested in raising \$1 million of new equity

NOrthern Manufacturing is interested in raising \$1 million of new equity capital through a rights offering. the firm currently has 250,000 shares of common stock outstanding. it expects to set the subscription price at \$50 and anticipates that the stock will sell for \$55 with rights. Sarah Lee holds 24,000 shares of NOrthern common stock. If she excercises her rights, how many additional shares can she purchase?

## Starting with the initial conditions, you expect the dividend-payout ratio to

Starting with the initial conditions, you expect the dividend-payout ratio to be constant, the rate of inflation to increase by 3 percent, and the growth rate to increase by 2 percent. Compute the expected P/E. Starting with the initial conditions, you expect the dividend-payout ratio to be constant, the rate of inflation to decline by 3 percent, and the growth rate to decline by 1 percent. Compute the expected P/E.

## Perhaps the most important step when developing forecasted financial statements is

Perhaps the most important step when developing forecasted financial statements is to determine the breakdown of common equity between common stock and retained earnings. b. The first, and perhaps the most critical, step in forecasting financial requirements is to forecast future sales. c. Forecasted financial statements, as discussed in the text, are used primarily as a part of the managerial compensation program, where management’s historical performance is evaluated. d. The capital intensity ratio gives us an idea of the physical condition of the firm’s fixed assets.

## Which of the following statements is CORRECT? a. Perhaps the most

Which of the following statements is CORRECT? a. Perhaps the most important step when developing forecasted financial statements is to determine the breakdown of common equity between common stock and retained earnings. b. The first, and perhaps the most critical, step in forecasting financial requirements is to forecast future sales. c. Forecasted financial statements, as discussed in the text, are used primarily as a part of the managerial compensation program, where management’s historical performance is evaluated. d. The capital intensity ratio gives us an idea of the physical condition of the firm’s fixed assets.

## Two years ago, Maple Enterprises issued 6%, 20 year bonds and

Two years ago, Maple Enterprises issued 6%, 20 year bonds and Temple Corp. issued 6%, 10 year bonds. Since their time of issue, interest rates have increased. Which of the following statements is true of each firm’s bond prices in the market, assuming they have equal risk. a. Maple’s decreased more than Temple’s b. Temple’s decreased more than Maple’s c. Maple’s increased more than Temple’s d. They are both priced the same

## Dahlia Inc. has a 12-year, 10% annual coupon bond outstanding. The

Get college assignment help at uniessay writers Dahlia Inc. has a 12-year, 10% annual coupon bond outstanding. The bond has a face value (FV) of \$1,000, and a yield to maturity (YTM) of 9%. What is the current market price of the bond?

## Boudreaux, age 30, wants to retire at age 60. He currently

Boudreaux, age 30, wants to retire at age 60. He currently makes \$50,000 per year. He has an objective to live on 75 percent of his preretirement income when he retires. He wants the retirement income to be inflation adjusted and he wants to receive the income for each year of retirement at the beginning of that year. Boudreaux has an investment portfolio valued at \$150,000, which is currently earning 8 percent average annual returns. He expects to continue earning 8 percent throughout the rest of his life. Boudreaux expects inflation to average 3 percent and based on his ancestors’ health and lifespans, he predicts that he will live to age 95. Boudreaux is currently saving 7 percent of his gross income at each year-end and expects to continue this level of savings. Boudreaux wants to ignore any Social Security benefits for purposes of planning. How much does he need to accumulate by age 60? a. \$1,518,209.48 b. \$1,591,908.97 c. \$1,491,834.24 d. \$2,122,545.29

## Find the after-tax return to a corporation that buys a share

Find the after-tax return to a corporation that buys a share of preferred stock at \$40, sells it at year-end at \$40, and receives a \$4 year-end dividend. The firm is in the 30% tax bracket. (BODIE, Zvi. Investments, 8th Edition. Irwin/McGraw-Hill, 062008. 10.6.3).

## The price of a stock is 435. the price of a

The price of a stock is 435. the price of a one year European put option on the stock with a strike price of \$40 is quoted as \$8 and the price of a one-year European call option on the stock with a strike price of \$33 is quoted as \$4. Suppose that an investor buys 100 shares, short 100 call option, and buys 100 put options. Draw a diagram illustrating how the investor’s profit or loss varies with the stock price over the next year. How does your answer change if the investor if the investor buys 100 shares, shorts 200 call options, and buys 200 put options? ( note: i think this kind of diagram called ( Bear Spreads), also please, show every critical number and any line related to the Question .

## Phillips Equipment has 80,000 bonds outstanding that are selling at par.

Phillips Equipment has 80,000 bonds outstanding that are selling at par. Bonds with similar characteristics are yielding 6.75 percent. The company also has 750,000 shares of 7 percent preferred stock and 2.5 million shares of common stock outstanding. The preferred stock sells for \$53 a share. The common stock has a beta of 1.34 and sells for \$42 a share. The U.S. Treasury bill is yielding 2.8 percent and the return on the market is 11.2 percent. The corporate tax rate is 38 percent. What is the firm’s weighted average cost of capital

## 3. Phillips Equipment has 80,000 bonds outstanding that are selling at

3. Phillips Equipment has 80,000 bonds outstanding that are selling at par. Bonds with similar characteristics are yielding 6.75 percent. The company also has 750,000 shares of 7 percent preferred stock and 2.5 million shares of common stock outstanding. The preferred stock sells for \$53 a share. The common stock has a beta of 1.34 and sells for \$42 a share. The U.S. Treasury bill is yielding 2.8 percent and the return on the market is 11.2 percent. The corporate tax rate is 38 percent. What is the firm’s weighted average cost of capital? HInt: This is a three step problem requiring to find the cost of common stock, the cost of preferred stock; the total value (V) of the capital base and the WACC.

## 4. Are the assumptions involved in applying the AFN method of

4. Are the assumptions involved in applying the AFN method of forecasting financial needs accurate for CSE? Explain.

## 3. A firm’s current balance sheet is as follows: Assets \$100

3. A firm’s current balance sheet is as follows: Assets \$100 Debt \$10 Equity \$90 a. What is the firm’s weighted-average cost of capital at various combinations of debt and equity, given the following information? b. Construct a pro forma balance sheet that indicates the firm’s optimal capital structure. Compare this balance sheet with the firm’s current balance sheet. What course of action should the firm take? Assets \$100 Debt \$? Equity \$? c. As a firm initially substitutes debt for equity financing, what happens to the cost of capital, and why? d. If a firm uses too much debt financing, why does the cost of capital rise?

## Problem 12-12 Project Cash Flows (LG3) You are evaluating a project

Problem 12-12 Project Cash Flows (LG3) You are evaluating a project for The Ultimate recreational tennis racket, guaranteed to correct that wimpy backhand. You estimate the sales price of The Ultimate to be \$460 per unit and sales volume to be 1,100 units in year 1; 1,256 units in year 2; and 1,331 units in year 3. The project has a three-year life. Variable costs amount to \$230 per unit and fixed costs are \$100,600 per year. The project requires an initial investment of \$170,000 in assets, which will be depreciated straight-line to zero over the three-year project life. The actual market value of these assets at the end of year 3 is expected to be \$35,900. NWC requirements at the beginning of each year will be approximately 20 percent of the projected sales during the coming year. The tax rate is 34 percent and the required return on the project is 10 percent. Required: What will the cash flows for this project be? (Round your answers to 2 decimal places. Negative amount should be indicated by a minus sign. Omit the “\$” sign in your response) Total cash flow Year 0 \$ Year 1 \$ Year 2 \$ Year 3 \$ ——————————————————————————–

Q2: S

## Question 10. If countries are highly influential upon each other, the

Question 10. If countries are highly influential upon each other, the correlations of their economic growth levels would likely be _______. A firm would benefit _______ by diversifying sales among these countries relative to another set of countries that were not influential upon each other. A) high and positive; more B) close to zero; more C) high and positive; less D) close to zero; less

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