1.) Blossom, Inc., management expects the company to earn cash flows of $11,600, $15,700, $17,800, and $19,800 over the next four years. If the company uses an 7 percent discount rate, what is the future value of these cash flows at the end of year 4?

2.) Anthony Walker borrowed some money from his friend and promised to repay him $1,270, $1,320, $1,470, $1,610, and $1,610 over the next five years. If the friend normally discounts investment cash flows at 7.5 percent annually, how much did Anthony borrow?

3.) Jennifer Davis is a sales executive at a Baltimore firm. She is 25 years old and plans to invest $2,300 every year in an IRA account, beginning at the end of this year until she reaches the age of 65. If the IRA investment will earn 11.10 percent annually, how much will she have in 40 years, when she turns 65?

4.) Linda Williams is a sales executive at a Baltimore firm. She is 25 years old and plans to invest $4,000 each year in an IRA account until she is 65 at which time she will retire (a total of 40 payments). If Linda invests at the beginning of each year, and the IRA investment will earn 10.70 percent annually, how much will she have when she retires? Assume that she makes the first payment today.

Donald Inc. has $2 million in assets, no debt, and no cash. It is listed with 100,000 shares outstanding. Assume there is no tax.

The company decides to take out a loan of $1 million at an interest rate of 10% in order to buy back shares.

1. How many shares can it buy back? How many shares are left after the buy-back?

2. If WACC was 15% before the buy-back, what is Darrian’s WACC after the buy-back? Why?

3. What is the required rate of return by equity holders after the buy-back? Why?

You are trying to decide how much to save for retirement. Assume you plan to save $ 6, 500 per year with the first investment made one year from now. You think you can earn 9.0​% per year on your investments and you plan to retire in  31 ​years, immediately after making your last $ 6, 500 investment. a. How much will you have in your retirement account on the day you​ retire? b.​ If, instead of investing $ 6, 500 per​ year, you wanted to make one​ lump-sum investment today for your retirement that will result in the same retirement​ saving, how much would that lump sum need to​ be? c. If you hope to live for 19 years in​ retirement, how much can you withdraw every year in retirement​ (starting one year after​ retirement) so that you will just exhaust your savings with the 19th withdrawal​ (assume your savings will continue to earn 9.0​% in​ retirement)? d.​ If, instead, you decide to withdraw $ 194, 000 per year in retirement​ (again with the first withdrawal one year after​ retiring), how many years will it take until you exhaust your​ savings? (Use​ trial-and-error, a financial​ calculator: solve for​ "N", or​ Excel: function​ NPER) e. Assuming the most you can afford to save is $ 1 comma 300 per​ year, but you want to retire with $ 1,000,000 in your investment​ account, how high of a return do you need to earn on your​ investments? (Use​ trial-and-error, a financial​ calculator: solve for the interest​ rate, or​ Excel: function​ RATE) How much will you have in your retirement account on the day you​ retire? The amount in the retirement account in 31 years would be ​$ nothing. ​(Round to the nearest​ cent.) b.​ If, instead of investing $ 6, 500 per​ year, you wanted to make one​ lump-sum investment today for your retirement that will result in the same retirement​ saving, how much would that lump sum need to​ be? You will need to make one lump sum investment today of ​$ nothing. ​(Round to the nearest​ cent.) c. If you hope to live for 19 years in​ retirement, how much can you withdraw every year in retirement​ (starting one year after​ retirement) so that you will just exhaust your savings with the 19th withdrawal​ (assume your savings will continue to earn 9.0​% in​ retirement)? The amount you can withdraw every year in retirement is ​$ nothing. ​(Round to the nearest​ cent.) d.​ If, instead, you decide to withdraw $ 194, 000 per year in retirement​ (again with the first withdrawal one year after​ retiring), how many years will it take until you exhaust your​ savings? (Use​ trial-and-error, a financial​ calculator: solve for​ "N", or​ Excel: function​ NPER) You will exhaust your savings in nothing years.  ​(Round to two decimal​ places.) e. Assuming the most you can afford to save is $ 1 comma 300 per​ year, but you want to retire with $ 1,000, 000 in your investment​ account, how high of a return do you need to earn on your​ investments? (Use​ trial-and-error, a financial​ calculator: solve for the interest​ rate, or​ Excel: function​ RATE) You will need a return of nothing​%. ​(Round to two decimal​ places.)

The Wolfpack Corp. is a U.S. exporter that invoices its exports to the United Kingdom in British pounds. If it expects that the pound will depreciate against the dollar in the future, explain to Wolfpack Corp. how a forward contract and an option contract can help hedge its cash flows that are received in foreign currency.

Below is a list of prices for $1,000-par zero-coupon Treasury securities of various maturities. An 12% coupon $100 par bond pays an semi-annual coupon and will mature in 1.5 years. What should be the YTM on the bond? Assume semi-annual interest compounding for this question. Maturity (periods) Price of $1,000 par bond 1 943.4 2 873.52 3 780

Please solve in Excel format and show step-by-step formulas

Not wanting to leave his beloved alma mater, Will Anderson has come up with a scheme to stay around for 5 more years: He has decided to bid on the fast-food concession rights at the football stadium. He feels sure that a bid of $60,000 will win the concession, which gives him the right to sell food at football games for the next 5 years. He estimates that annual operating costs will be 40% of sales and annual sales will average $100,000. His Uncle Josh has agreed to lend him the $60,000 to make the bid. He will pay Josh $15,400 at the end of each year. His tax rate is 15%.

(a) Use a spreadsheet model to answer the following question. What is Will’s average annual after-tax profit? Assume that the yearly payments of $15,400 are tax deductible.

(b) Suppose that sales will probably vary plus or minus 40% from the average of $100,000 each year. Will is concerned about the minimum after-tax profit he can earn in a year. He feels that he can survive if it is at least $20,000. Model annual sales for the 5 years as five continuous uniform random variables. Based on a sample of 7,500 five-year periods (750 periods if using Excel alone), estimate the probability that over any five-year period the minimum after-tax profit for a year will be at least $20,000. Should Will bid for the concession?

Barry�s Steroids Company has $1,000 par value bonds outstanding at 16 percent interest. The bonds will mature in 40 years. If the percent yield to maturity is 14 percent, what percent of the total bond value does the repayment of principal represent? Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods. (Do not round intermediate calculations. Round your final answer to 2 decimal places. Assume interest payments are annual.) Principal as a percentage of bond price % what is the principal as a percentage bond price

Profit margins and turnover ratios vary from one industry to another. What differences would you expect to find between a grocery chain and a steel company? Think particularly about the turnover ratios, the profit margin, and the DuPont equation.

Over the past year, M.D. Ryngaert & Co. has realized an increase in its current ratio and a drop in its total assets turnover ratio. However, the company's sales, quick ratio, and fixed assets turnover ratio have remained constant. What explains these changes?

7. Company Triple A semi-annual par value bonds currently sell for $1,055. They have a 5.50% coupon rate and a 25-year maturity and are callable in 6 years at 8% premium. Assume that no costs other than the call premium would be incurred to call and refund the bonds, and also assume that the yield curve is horizontal, with rates expected to remain at current levels on into the future. Under these conditions, what rate of returns should an investor expect to earn if he or she purchases these bonds, the YTC or the YTM and why? Is this a discount or premium bond and why?

Risk Preference Exercises—Compensation

1. Given what you know about risk preferences and what propels individuals to take risk evaluate, using what you know about the business model of each firm and from the perspective of the shareholder of the firm:

1. The use of trading limits by an investment bank’s proprietary trading desk. E.g., $2 mil in losses per trader per day and an aggregate limit of the trading desk = $40 mil per day. Evaluate the traders’ behavior in terms of risk taken and possibility for returns generated.

2. The effectiveness of a “Deals Committee” used by a private equity firm in which deal teams present the merits of the deals they want to close. The merits would include expected profitability and risk metrics.

3. An executive compensation plan in which the senior executive’s plan includes: $3 mil annual salary, fully vested pension and 100,000 warrants granted per year with a strike price of $75 (company shares are currently trading at $50).

Financial ratio analysis is conducted by managers, equity investors, long term creditors, and short-term creditors. What is the primary emphasis of each of these groups in evaluating ratios?

Determine the price of a share of stock whose last annual dividend payment was $1.5 assuming a required rate of return of 15% and considering the following restrictions: a) The dividend payment is expected to remain constant indefinitely. b) The dividend payment is expected to grow at a constant rate of 3% per year indefinitely. c) The dividend payment is expected to grow at a rate of 7% for four years and then immediately decline to 3% indefinitely. d) How does the calculated intrinsic values compare to the current price of $14? BONUS: Use an IF statement to display whether the stock is undervalued, overvalued, or fairly valued. Millennium Inc. stock is selling for $20 a share based on a 15 percent rate of return. What is the last annual dividend payment if the dividends are expected to grow at 3% annually?

eBook An investor has two bonds in her portfolio, Bond C and Bond Z. Each bond matures in 4 years, has a face value of $1,000, and has a yield to maturity of 8.2%. Bond C pays a 11% annual coupon, while Bond Z is a zero coupon bond. Assuming that the yield to maturity of each bond remains at 8.2% over the next 4 years, calculate the price of the bonds at each of the following years to maturity. Round your answers to the nearest cent. Years to Maturity Price of Bond C Price of Bond Z 4 $ $ 3 $ $ 2 $ $ 1 $ $ 0 $ $ Select the correct graph based on the time path of prices for each bond. The correct sketch is .

You bought the building, located at Little Ferry, NJ for $50 Million, which was 6% Capitalization Rate (CAP). This building is occupied only by Wal-Mart. You made 40% down and financed 60% of the purchase price at 5% APR, 5 year balloon with 25 year amortization schedule. You have 25 year Absolute Triple Net lease with Wal-Mart. There is no annual escalation of the base rent. The building’s $50 million value consists of $25 million land value and $25 million improvement. In addition to $50 million purchase price, you had to pay 3% transaction (closing) costs (equivalently $1.5 million), which include the legal, financing, administrative, inspection, and all taxes. Use 39 years for the annual depreciation. Assume 30% tax rate.

What is the net cash flow for the first year? Note: Net Cash Flow is defined as NOI – Annual Interest Payment – Tax + Annual Depreciation.