Questions from Corporate Finance

Q: If the PV of $139 is $125, what

If the PV of $139 is $125, what is the discount factor?

Q: What is the PV of $100 received in: a

What is the PV of $100 received in: a. Year 10 (at a discount rate of 1%)? b. Year 10 (at a discount rate of 13%)? c. Year 15 (at a discount rate of 25%)? d. Each of years 1 through 3 (at a discou...

Q: a. An 8%, five-year bond yields 6%.

a. An 8%, five-year bond yields 6%. If this yield to maturity remains unchanged, what will be its price one year hence? Assume annual coupon payments and a face value of $100. b. What is the total re...

Q: Restate the net cash flows in Table 6.6 in real

Restate the net cash flows in Table 6.6 in real terms. Discount the restated cash flows at a real discount rate. Assume a 20% nominal rate and 10% expected inflation. NPV should be unchanged at +3,802...

Q: a. Longer-maturity bonds necessarily have longer durations.

a. Longer-maturity bonds necessarily have longer durations. b. The longer a bond’s duration, the lower its volatility. c. Other things equal, the lower the bond coupon, the higher its volatility....

Q: Calculate the durations and volatilities of securities A, B, and

Calculate the durations and volatilities of securities A, B, and C. Their cash flows are shown below. The interest rate is 8%.

Q: What is the payback period on each of the following projects?

What is the payback period on each of the following projects? Given that you wish to use the payback rule with a cutoff period of two years, which projects would you accept? c. If you use a cutoff per...

Q: True or false? Explain. a. The value of

True or false? Explain. a. The value of a share equals the discounted stream of future earnings per share. b. The value of a share equals the PV of earnings per share assuming the firm does not grow...

Q: Company Z-prime is like Z in all respects save one

Company Z-prime is like Z in all respects save one: Its growth will stop after year 4. In year 5 and afterward, it will pay out all earnings as dividends. What is Z-prime’s stock price? Assume next ye...

Q: F&H Corp. continues to invest heavily in a declining

F&H Corp. continues to invest heavily in a declining industry. Here is an excerpt from a recent speech by F&H’s CFO: We at F&H have of course noted the complaints of a few spineless investors and unin...