Unformatted Attachment Preview
Description / Instructions: Complete the following in WileyPLUS: * Problem 5.17 * Problem 5.21 * Problem 6.19 * Problem 6.27 * Problem 7.16 *
Problem 8.24 * Problem 9.15
Question 1
Your finance text book sold 54,000 copies in its first year. The publishing company expects the sales to grow at a rate of 15.0 percent
for the next three years, and by 14.0 percent in the fourth year. Calculate the total number of copies that the publisher expects to sell
in year 3 and 4. (If you solve this problem with algebra round intermediate calculations to 6 decimal places, in all cases round
your final answers to the nearest whole number.)
Number of copies sold after 3 years
Number of copies sold in the fourth year
Question 2
Find the present value of $4,500 under each of the following rates and periods.
(If you solve this problem with algebra round intermediate calculations to 6 decimal places, in all cases round your final answer
to the nearest penny.)
a. 8.9 percent compounded monthly for five years.
$
Present value
b. 6.6 percent compounded quarterly for eight years.
$
Present value
c. 4.3 percent compounded daily for four years.
$
Present value
d. 5.7 percent compounded continuously for three years.
$
Present value
Question 3
Trigen Corp. management will invest cash flows of $640,189, $1,267,072, $437,319, $818,400, $1,239,644, and $1,617,848 in
research and development over the next six years. If the appropriate interest rate is 8.83 percent, what is the future value of these
investment cash flows six years from today? (Round answer to 2 decimal places, e.g. 15.25.)
Future value
$
Question 4
You wrote a piece of software that does a better job of allowing computers to network than any other program designed for this
purpose. A large networking company wants to incorporate your software into their systems and is offering to pay you $540,000
today, plus $540,000 at the end of each of the following six years for permission to do this. If the appropriate interest rate is 7 percent,
what is the present value of the cash flow stream that the company is offering you? (Round answer to the nearest whole dollar, e.g.
5,275.)
Present value
$
Question 5
Barbara is considering investing in a stock and is aware that the return on that investment is particularly sensitive to how the economy
is performing. Her analysis suggests that four states of the economy can affect the return on the investment. Using the table of returns
and probabilities below, find
Boom
Good
Level
Slump
Probability
Return
0.4
0.3
0.2
0.1
25.00%
15.00%
10.00%
-5.00%
What is the expected return on Barbara’s investment? (Round answer to 3 decimal places, e.g. 0.076.)
Expected return
What is the standard deviation of the return on Barbara's investment? (Round intermediate calculations and answer to 5 decimal
places, e.g. 0.07680.)
Standard deviation
Question 6
Trevor Price bought 10-year bonds issued by Harvest Foods five years ago for $1,011.75. The bonds make semiannual coupon
payments at a rate of 8.4 percent. If the current price of the bonds is $1,079.33, what is the yield that Trevor would earn by selling the
bonds today? (Round intermediate calculations to 4 decimal places, e.g. 1.2514 and final answer to 2 decimal places, e.g.
15.25%.)
Effective annual yield
%
Question 7
The First Bank of Ellicott City has issued perpetual preferred stock with a $100 par value. The bank pays a quarterly dividend of
$1.65 on this stock. What is the current price of this preferred stock given a required rate of return of 15.0 percent? (Round answer to
2 decimal places, e.g. 15.25.)
Current price
$
Description / Instructions: Complete practice quiz.
Question 1
Genaro needs to capture a return of 40 percent for his one-year investment in a property. He believes that he can sell the property at
the end of the year for $150,000 and that the property will provide him with rental income of $25,000. What is the maximum amount
that Genaro should be willing to pay for the property?
$150,000
$112,500
$125,000
$137,500
Question 2
The process of identifying the bundle of projects that creates the greatest total value and allocating the available capital to the projects
is known as
risk analysis.
capital rationing.
budgeting.
rationing.
Question 3
Capital rationing. You are considering a project that has an initial cost of $1,200,000. If you take the project, it will produce net
cash flows of $300,000 per year for the next six years. If the appropriate discount rate for the project is 10 percent, what is the
profitability index of the project?
0.09
2.18
2.09
1.09
Question 4
What might cause a firm to face capital rationing?
If a firm has more than one project with a positive NPV.
If investors require returns for their capital that are too high.
If a firm has several projects that are expected to generate negative IRR’s.
If a firm rejects some capital investments that are expected to generate positive NPV’s.
Question 5
How firms estimate their cost of capital: The WACC for a firm is 19.75 percent. You know that the firm is financed with $75
million of equity and $25 million of debt. The cost of debt capital is 7 percent. What is the cost of equity for the firm?
32.50%
58.00%
24.00%
19.75%
Question 6
The cost of debt: Bellamee, Inc., has semiannual bonds outstanding with five years to maturity and are priced at $920.87. If the
bonds have a coupon rate of 7 percent, then what is the YTM for the bonds?
4.5%
9.0%
9.2%
7.0%
Question 7
The cost of debt: Beckham Corporation has semiannual bonds outstanding with 13 years to maturity and are currently priced at
$746.16. If the bonds have a coupon rate of 8.5 percent, then what is the after-tax cost of debt for Beckham if its marginal tax rate is
35%? Assume that your calculation is made as on Wall Street.
8.125%
12.500%
12.890%
6.250%
Question 8
The cost of equity: RadicalVenOil, Inc., has a cost of equity capital equal to 22.8 percent. If the risk-free rate of return is 10 percent
and the expected return on the market is 18 percent, then what is the firm's beta if the firm's marginal tax rate is 35 percent?
1.60
1.0
1.28
4.10
Question 9
Which type of project do financial managers typically use the highest cost of capital when evaluating?
Market expansion projects
Extension projects
Efficiency projects
New product projects