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Time Value Project-
1. You have $350.00 per month to spend on a car payment. If your credit union charged 7.5% interest on a used car, how much car can you purchase if you will only finance for 4 years?
2. If you want to purchase a factory. You have $50,000 to put down. All you can afford is $1500.00 per month and you do not want to finance for more than 15 years @ 6.5%, (your taxes will be $185.00 per month and insurance $600.00 a month), what is the amount you can pay for the house? (Show all your work)
3. How much would you pay for this business today assuming you needed a 18% return to make this deal? (Same problem as above.) What type of a problem is this? _______________
What is the Modified Duration of this bond when the market yield is at YTM and explain why and when Modified Duration under-predicts and over-predicts the change in bond price as the market yield changes.
At time 0, the share price of a stock was $85. At that time, a call option on a share of stock with a strike price of $95 expiring 6 months later had a premium $2.00. Risk free interest is 4% annual effective. Determine the payoff and the profit on t..
Unadjusted trial balance dated December 31, 2015, reports Income Taxes Expense of $70,000, and Income Taxes Payable of $20,000. The company’s accountant estimates that income taxes expense for the entire year ended December 31, 2015, is $85,000.
General Matter’s outstanding bond issue has a coupon rate of 8.2%, and it sells at a yield to maturity of 7.25%. The firm wishes to issue additional bonds to the public at face value. What coupon rate must the new bonds offer in order to sell at face..
Land is purchased for $75,000. It is agreed for the land to be paid for over a 5 year period with annual payments and using 12% annual compound interest rate. Each payment is to be $3000 more than the previous payment. Determine the size of the last ..
You are considering implementing a lockbox system for your firm. The system is expected to reduce the average collection time by 2.8 days. On an average day, your firm receives 2,419 checks with an average value of $1,287 each. The daily interest rat..
Reversing Rapids Co. purchases an asset for $182,837. This asset qualifies as a five-year recovery asset under MACRS. The five-year expense percentages for years 1, 2, 3, and 4 are 20.00%, 32.00%, 19.20%, and 11.52% respectively. Reversing Rapids has..
Clark Communications has a capital structure that consists of 70% common stock and 30% long-term debt. In order to calculate Clark's WACC, an analyst has accumulated the following information: The company currently has a 30-year bond issue outstandin..
You expect that interest rates will fall sharply during the year and want to reduce your bank's risk position. The current yield curve is inverted with long- term rates below short- term rates that FSB loses in year two if rates either rise or fall s..
Which of the following statements is NOT a disadvantage of the regular payback method?
Rowan Company has a net profit margin of 8.3 percent, debt ratio of 50 percent, total assets of $5,087,200, sales of $6,738,600, and a dividend payout ratio of 65 percent. The firm’s management desires a sustainable growth rate (SGR) of 12 percent bu..
Thornley Machines is considering a 3-year project with an initial cost of $1,020,000. The project will not directly produce any sales but will reduce operating costs by $640,000 a year. The equipment is depreciated straight-line to a zero book value ..
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