2.99 See Answer

Question: A 10-year, 12% semiannual coupon bond


A 10-year, 12% semiannual coupon bond with a par value of $1,000 may be called in 4 years at a call price of $1,060. The bond sells for $1,100. (Assume that the bond has just been issued.)
a. What is the bond’s yield to maturity?
b. What is the bond’s current yield?
c. What is the bond’s capital gain or loss yield?
d. What is the bond’s yield to call?



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> Companies U and L are identical in every respect except that U is unlevered while L has $10 million of 5% bonds outstanding. Assume that: (1) All of the MM assumptions are met. (2) Both firms are subject to a 40% federal-plus-state corporate tax rate. (3

> Breuer Investment’s convertible bonds have a $1,000 par value and a conversion price of $50 a share. What is the convertible issue’s conversion ratio?

> Consider the data in Problem 19-1. Assume that RC’s tax rate is 40% and that the equipment’s depreciation would be $100 per year. If the company leased the asset on a 2-year lease, the payment would be $110 at the beginning of each year. If RC borrowed a

> Reynolds Construction (RC) needs a piece of equipment that costs $200. RC can either lease the equipment or borrow $200 from a local bank and buy the equipment. If the equipment is leased, the lease would not have to be capitalized. RC’

> Bynum and Crumpton ,as mall jewelry manufacturer, has been successful and has enjoyed a positive growth trend. Now B&C is planning to go public with an issue of common stock, andit faces the problem of setting an appropriate price for the stock. The

> In 1983,the Japanese yen-U.S. dollarexchangeratewas245yenperdollar,andthedollar cost ofa compact Japanese-manufactured car was $8,000.Supposethat now the exchange rate is 80 yen per dollar. Assume there has been no inflation in the yen cost of an automob

> (a) If a firm buys under terms of 3 15, net 45, but actually pays on the 20th day and still takes the discount, what is the nominal cost of its non free trade credit? (b) Does it receive more or less credit than it would if it paid within 15 days?

> Calculate the nominal annual cost of non free trade credit under each of the following terms. Assume that payment is made either on the discount date or on the due date. a. 1 10, net 20 b. 2 10, net 60 c. 3 10, net 45 d. 2 10, net 45 e. 2 10, net 40

> Snider Industries sells on terms of 2 10, net 45. Total sales for the year are $1,500,000. Thirty percent of customers pay on the 10th day and take discounts; the other 70% pay, on average, 50 days after their purchases. a. What is the days sales outstan

> What are the nominal and effective costs of trade credit under the credit terms of 3 15, net 30?

> Williams & Sons last year reported sales of $12 million, cost of goods sold (COGS) of $10 million, and an inventory turnover ratio of 2. The company is now adopting a new inventory system. If the new system is able to reduce the firm’s inventory level an

> Boehm Corporation has had stable earnings growth of 8% a year for the past 10 years and in 2016 Boehm paid dividends of $2.6 million on net income of $9.8 million. However, in 2017 earnings are expected to jump to $12.6 million, and Boehm plans to invest

> An annuity is defined as a series of payments of a fixed amount for a specific number of periods. Thus, $100 a year for 10 years is an annuity, but $100 in Year 1, $200 in Year 2, and$400inYears 3through10 does not constitute an annuity. However the enti

> Garlington Technologies Inc.’s 2016 financial statements are shown below: Suppose that in 2017 sales increase by 10% over 2016 sales and that 2017 dividends will increase to $112,000. Forecast the financial statements using the foreca

> Stevens Textile Corporation’s 2016 financial statements are shown below: a. Suppose 2017 sales are projected to increase by 15 % over 2016 sales. Use the forecasted financial statement method to forecast a balance sheet and income st

> Upton Computers makes bulk purchases of small computers, stocks the min conveniently located warehouses, ships them to its chain of retail stores, and has a staff to advise customers and help them set up their new computers. Upton’s bal

> The Booth Company’s sales are forecasted to double from $1,000 in 2016 to $2,000 in 2017. Here is the December 31, 2016, balance sheet: Booth’s fixed assets were used to only 50% of capacity during 2016, but its curr

> At year-end 2016, Wallace Landscaping’s total assets were $2.17 million, and its accounts payable were $560,000. Sales, which in 2016 were $3.5 million, are expected to increase by 35% in 2017. Total assets and accounts payable are proportional to sales,

> Maggie’s Muffins Bakery generated$5,000,000 in sales during 2016, and its year-end total assets were $2,500,000. Also, at year-end 2016, current liabilities were $1,000,000, consisting of $300,000 of notes payable, $500,000 of accounts payable, and $200,

> Refer to Problem 12-1. Return to the assumption that the company had $5 million in assets at the end of 2016, but now assume that the company pays no dividends. Under these assumptions, what would be the additional funds needed for the coming year? Why i

> Refer to Problem 12-1. What would be the additional funds needed if the company’s year end 2016 assets had been $7 million? Assume that all other numbers, including sales, are the same as in Problem 12-1 and that the company is operating at full capacity

> The following table gives the current balance sheet for Travellers Inn Inc. (TII), a company that was formed by merging a number of regional motel chains. The following facts also apply to TII. (1) Short-term debt consists of bank loans that currently

> EMC Corporation has never paid a dividend. Its current free cash flow of $400,000 is expected to grow at a constant rate of 5%. The weighted average cost of capital is WACC 12%. Calculate EMC’s estimated value of operations.

> What is an opportunity cost rate? How is this rate used in discounted cash flow analysis, and where is it shown on a timeline? Is the opportunity rate a single number that is used to evaluate all potential investments?

> Conroy Consulting Corporation (CCC) has been growing at a rate of 30% per year inrecent years. This same non constant growth rate is expected to last for another 2 years g0,1 g1,2 30% . a. If D0 $2 50, rs 12% , and gL 7%, then what is CCC’s stock worth

> Dozier Corporation is a fast-growing supplier of office products. Analysts project the following free cash flows (FCFs) during the next 3 years, after which FCF is expected to grow at a constant 7% rate. Dozier’s weighted average cost o

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> Investors require a 13% rate of return on Brook Corporation stock rs = 13% . a. What would the estimated value of Brook’s stock be if the previous dividend were D0 = $3 00 and if investors expect dividends to grow at a constant annual rate of (1) −5%, (

> Several years ago, Rolen Riders issued preferred stock with a stated annual dividend of 10% of its $100 par value. Preferred stock of this type currently yields 8%. Assume dividends are paid annually. a. What is the estimated value of Rolen’s preferred s

> Simpkins Corporation does not pay any dividends because it is expanding rapidly and needs to retain all of its earnings. However, investors expect Simpkins to begin paying dividends, with the first dividend of $0.50 coming 3 years from today. The dividen

> Assume that the average firm in your company’s industry is expected to grow at a constant rate of 6% and that its dividend yield is 7 %. Your company is about as risky as the average firm in the industry and just paid a dividend D0 of $1. You expect that

> Brushy Mountain Mining Company’s coal reserves are being depleted, so its sales are falling. Also, environmental costs increase each year, so its costs are rising. As a result, the company’s earnings and dividends are declining at the constant rate of 4%

> Define each of the following terms: a. Proprietorship; partnership; corporation; charter; bylaws b. Limited partnership; limited liability partnership; professional corporation c. Stockholder wealth maximization d. Money market; capital market; primary m

> You have observed the following returns over time: Assume that the risk-free rate is 6% and the market risk premium is 5%. a. What are the betas of Stocks X and Y? b. What are the required rates of return on Stocks X and Y? c. What is the required rate

> You are considering an investment in either individual stocks or a portfolio of stocks. The two stocks you are researching, Stock A and Stock B, have the following historical returns: a. Calculate the average rate of return for each stock during the 5-

> a. Find the present values of the following cash flow streams. The appropriate interest rate is 8%. b. What is the value of each cash flow stream at a 0% interest rate? Year Cash Stream A Cash Stream B 1 $100 $300 400 400 400 400 400 400 5 300 100 N

> Find the present value of the following ordinary annuities a. $400 per year for 10 years at 10% b. $200 per year for 5 years at 5% c. $400 per year for 5 years at 0% d. Now rework parts a, b, and c assuming that payments are made at the beginning of each

> You want to accumulate $1 million by your retirement date, which is 25 years from now. You will make 25 deposits in your bank, with the first occurring today. The bank pays 8% interest, compounded annually. You expect to receive annual raises of 3%, whic

> Assume that your father is now 50 years old, plans to retire in 10 years, and expects to live for 25 years after he retires — that is , until age 85. He wants his first retirement payment to have the same purchasing power at the time he retires as $40,00

> Anne Lockwood, manager of Oaks Mall Jewelry, wants to sell on credit, giving customers 3 months to pay. However, Anne will have to borrow from her bank to carry the accounts receivable. The bank will charge a nominal rate of 15% and will compound monthly

> It is now January 1.You plan to make a total of 5 deposits of $100 each, one every 6 months, with the first payment being made today. The bank pays a nominal interest rate of 12% but uses semi annual compounding. You plan to leave the money in the bank f

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> Give two reasons why stockholders might be indifferent between owning the stock of a firm with volatile cash flows and that of a firm with stable cash flows.

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> Assume that you inherited some money. A friend of yours is working as an unpaid internata local broker age firm, and her boss is selling securities that call for 4 payments of $50 (1 payment at the end of each of the next 4 years) plus an extra payment o

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> You need to accumulate $10,000. To do so, you plan to make deposits of $1,250 per year — with the first payment being made a year from today—into a bank account that pays 12% annual interest. Your last deposit will be less than $1,250 if less is needed t

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> A mortgage company offers to lend you $85,000; the loan calls for payments of $8,273.59 at the end of each year for30 years. What interest rate is the mortgage company charging you?

> Washington-Pacific (W-P) invested $4 million to buy a tract of land and plant some young pine trees. The trees can be harvested in 10 years, at which time W-P plans to sell the forest at an expected price of $8 million. What is W-P ’s expected rate of re

> Sales for Hanebury Corporation’s just-ended year were $12 million. Sales were $6 million 5 years earlier. a. At what rate did sales grow? b. Suppose someone calculated the sales growth for Hanebury in part a as follows: “Sales doubled in 5 years. This re

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> Explain why the APV model is suited for situations in which the capital structure is changing during the forecast period.

> Universal Bank pays 7% interest, compounded annually, on time deposits. Regional Bank pays 6% interest, compounded quarterly. a. Based on effective interest rates, in which bank would you prefer to deposit your money? b. Could your choice of banks be inf

> Find the future values of the following ordinary annuities. a. FV of $400 each 6 months for 5 years at a nominal rate of 12%, compounded semiannually b. FV of $200 each 3 months for 5 years at a nominal rate of 12% ,compounded quarterly c. The annuities

> Find the present value of $500 due in the future under each of the following conditions. a. 12% nominal rate, semiannual compounding, discounted back 5 years b. 12% nominal rate, quarterly compounding, discounted back 5 years c. 12% nominal rate, monthly

> Find the amount to which $500 will grow under each of the following conditions. a. 12% compounded annually for 5 years b. 12% compounded semiannually for 5 years c. 12% compounded quarterly for 5 years d. 12% compounded monthly for 5 years

> Data for Lozano Chip Company and its industry averages follow. a. Calculate the indicated ratios for Lozano. b. Construct the extended DuPont equation for both Lozano and the industry. c. Outline Lozano’s strengths and weaknesses as rev

> The Jimenez Corporation’s forecasted 2017 financial statements follow, along with some industry average ratios. Calculate Jimenez’s 2017 forecasted ratios, compare them with the industry average data, and comment brief

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> Hatfield Medical Supply’s stock price had been lagging its industry averages, so its board of directors brought in a new CEO, Jaiden Lee. Lee had brought in Ashley Novak, a finance MBA who had been working for a consulting company, to r

> Assume that you are nearing graduation and have applied for a job with a local bank. The bank’s evaluation process requires you to take an examination that covers several financial analysis techniques. The first section of the test addr

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> On the basis of your answers to Problems 22-1 and 22-2, indicate the range of possible prices that Hastings could bid for each share of Vandell common stock in an acquisition. Data from Problems 22-1: Hastings Corporation is interested in acquiring Van

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> Suppose a company simultaneously issues $50 million of convertible bonds with a coupon rate of 10% and $50 million of straight bonds with a coupon rate of 14%. Both bonds have the same maturity. Does the convertible issue’s lower coupon rate suggest that

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2.99

See Answer