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1. Suppose you borrow $10,000 from your parents to buy a car. You agree to pay $207.58 per month for 5 years. What is the annual percentage rate?
2. 25-year bond has a $1,000 face value, a 10% yield to maturity, and an 8% annual coupon rate, paid semi-annually. What is the market value of the bond?
3. An investment is expected to pay you $5000 per year for $10 years. What is this investment worth if you have an 8% required return?
Consider the example of moral hazard problem when a firm issues bonds/takes loans (in lecture note 9). We have shown that if the a sufficiently large fraction of the project is financed by the firm’s internal funds. Suppose now only 10% of the projec..
You are serving on a jury. A plaintiff is suing the city for injuries sustained after a freak street sweeper accident. In the trial, doctors testified that it will be five years before the plaintiff is able to return to work. The jury has already dec..
Mexican Motors’ market cap is 600 billion pesos. Next year’s free cash flow is 9.0 billion pesos. Security analysts are forecasting that free cash flow will grow by 8.0% per year for the next five years. Assume that the 8.0% growth rate is expected t..
What annual rate of return is earned on a $2000 investment made in year 3 when it grows to $3000 by the end of year six? What's the current yield of a 4.5% coupon corporate bond quoted at a price of 102.08?
Nordique Fab is an Arizona company dedicated to circuit board design and fabrication. It has acquired new stations and software for its three facilities at a cost of $450,000 per site. The estimated MV for each system the fourth year is expected to b..
Audrey Sanborn has just arranged to purchase a $530,000 vacation home in the Bahamas with a 20 percent down payment. The mortgage has a 5.9 percent APR, compounded monthly, and calls for equal monthly payments over the next 30 years. How much will Au..
(Cost of preferred stock) Your firm is planning to issue preferred stock. The stock is expected to sell for $98.64 a share and will have a $100 par value on which the firm will pay a 13.6 percent dividend. What is the cost of capital to the firm for ..
Xeroz issed bonds that pay $77.50 in interest each year and will maturein 9 years. You are thinking about purchasing the bonds. You have decided that you would need to recieve a return of 7 percent on your investmeny. What is the value of the bond to..
What was the flotation cost as a percentage of funds raised?
Compute the after-tax NPV of the new lift and advise the managers of Deer Valley about whether adding the lift will be a profitable investment.
describe the purpose of your investment and type of investment in detail. Draw timeline for Present Value of Ordinary Annuity with explanation.
You have been asked by the president of your company to evaluate the proposed acquisition of a new special-purpose truck for $60,000.
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