Reference no: EM133326296

Question 1) Prezas Company's balance sheet showed total current assets of $4,750, all of which were required in operations. Its current liabilities consisted of $965 of accounts payable, $600 of 6% short-term notes payable to the bank, and $340 of accrued wages and taxes. What was its net operating working capital?

Question 2) Vasudevan Inc. recently reported operating income of $4.40 million, depreciation of $1.40 million, and had a tax rate of 25%. The firm's expenditures on fixed assets and net operating working capital totaled $0.60 million. How much was its free cash flow, in millions?

Question 3) Suppose the real risk-free rate is 3.60% and the future rate of inflation is expected to be constant at 5.40%. What rate of return would you expect on a 1-year Treasury security, assuming the pure expectations theory is valid? Disregard cross-product terms, i.e., if averaging is required, use the arithmetic average.

Question 4) If 10-year T-bonds have a yield of 6.1%, 10-year corporate bonds yield 8.8%, the maturity risk premium on all 10-year bonds is 1.3%, and corporate bonds have a 0.4% liquidity premium versus a zero liquidity premium for T-bonds, what is the default risk premium on the corporate bond?