5) Assuming £1.00 = $1.45 and €1.00 = $1.25, the interest rate in the UK is 6.50% and the interest rate in Germany is 5.45%, determine the forward rate of the   £ / € if interest rate parity (IRP) holds. What does this imply about future forward rates? Explain how you can engage in covered interest arbitrage if the spot rate remains the same, and the interest rate in the UK is still 6.50%, and the forward rate is .868 £ / € .

Suppose that XYZ Corp is considering financing a project with only equity. The project’s unlevered cost of capital is 10%. The project will require a $1000 initial investment today and pay incremental free-cash-flows of $100 in perpetuity starting the end of the next year. If the firm were to finance the project with debt so that its D/E ratio is 0.50 how will the NPV of the project change? Assume the interest rate on the new debt will be 3%, and the firm faces a 21% tax rate. Round your answer to two decimals.

A loan is amortized over 7 years with monthly payments at a nominal interest rate of 9% compounded monthly. The first payment is $1000 and is to be paid one month from the date of the loan. Each succeeding monthly payment will be 3% lower than the prior payment. Calculate the outstanding loan balance immediately after the 68th payment is made.

A loan is repaid with payments which start at $400 the first year and increase by $60 per year until a payment of $1240 is made, at which time payments cease. If interest is 5% effective, find the amount of principal in the 6th payment.

Provide the pros and cons for each of the nonequity and equity modes of entry.

Bluegrass Mint Company has a debt-equity ratio of .30. The required return on the company’s unlevered equity is 12.6 percent and the pretax cost of the firm’s debt is 6.4 percent. Sales revenue for the company is expected to remain stable indefinitely at last year’s level of $19,500,000. Variable costs amount to 55 percent of sales. The tax rate is 24 percent and the company distributes all its earnings as dividends at the end of each year.

a. If the company were financed entirely by equity, how much would it be worth? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89)

- $52,928,571.43

b. What is the required return on the firm’s levered equity? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

-14.01%

c-1. Use the weighted average cost of capital method to calculate the value of the company. (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89)

c-2. What is the value of the company’s equity? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89)

c-3. What is the value of the company’s debt? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89)

d. Use the flow to equity method to calculate the value of the company’s equity. (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89)

The Pharoah Products Co. currently has debt with a market value of $275 million outstanding. The debt consists of 9 percent coupon bonds (semiannual coupon payments) which have a maturity of 15 years and are currently priced at $1,429.26 per bond. The firm also has an issue of 2 million preferred shares outstanding with a market price of $17 per share. The preferred shares pay an annual dividend of $1.20. Pharoah also has 14 million shares of common stock outstanding with a price of $20.00 per share. The firm is expected to pay a $2.20 common dividend one year from today, and that dividend is expected to increase by 4 percent per year forever. If Pharoah is subject to a 40 percent marginal tax rate, then what is the firm’s weighted average cost of capital?

Calculate the weights for debt, common equity, and preferred equity. (Round intermediate calculations and final answers to 4 decimal places, e.g. 1.2514.)
Debt ______

Preferred Equity _______

Common Equity ________

Calculate the cost of debt. (Round intermediate calculations to 4 decimal places, e.g. 1.2514 and final answer to 2 decimal places, e.g. 15.25%.)

Cost of Debit _______ %

What is the firm’s weighted average cost of capital? (Round intermediate calculations to 4 decimal places, e.g. 1.2514 and final answer to 2 decimal places, e.g. 15.25%.)

WACC ______%

It is your job to determine your company’s marginal cost of capital schedule. The firm’s current capital structure, which it considers optimal, consists of 30% debt, 20% preferred stock, and 50% common equity. The firm has determined that it can borrow up to $15 million in debt at a pre-tax cost of 7%, an additional $9 million at a pre-tax cost of 9%, and any additional debt funds at 11%. The firm expects to retain $25 million of its earnings; any additional income can be raised by issuing new common stock. The firm’s common stock currently trades at $30 per share, and it pays a $3.00 per share dividend. Dividends are expected to grow at a 5% annual rate over time. If the firm issues new common stock it will be sold to the public at a 10% discount. There will also be a $2.00 per share flotation cost. Preferred stock can be issued in unlimited quantities at a pre-tax cost of 12%. If the firm decides to raise more than $80m in capital, what is the cost of that capital? Assume a tax rate of 40%.

1.) Sharon is 45 years old and wants to retire at 65. She wishes to make monthly deposits in an account paying 9% compounded monthly so when she retires she can withdraw $1000 a month for 20 years. How much should she deposit each month? 2.) David works during the summer to help with expenses at school the following year. He is able to save $250 each week for 12 weeks, and he invests it at an annual rate of 7% that is compounded monthly. When school starts, David will begin to withdraw equal amounts from this account each week. What is the most David can withdraw each week for 34 weeks?

can I get some help please?

Project C0 C1 C2 C3 C4 C5

A -2000 +2000 0 0 0 0

B -3000 +2000 +1000 +2000 +1000 0

C -4000 +0 +2000 +1000 +1000 +3000

1. If the opportunity cost of capital is 12%, which projects have positive NPVs? Which

projects would a firm accept using the NPV rule?

2. Calculate the payback period of each project. Which project(s) would a firm using the

payback rule accept if the cutoff period were three years?

Classify the problem below using the funding categories A to F You do NOT need to solve the problem just classify it. Funding Type

A. Lump Sum Funds Lump Sum

B. Lump Sum Funds Ordinary Level Annuity

C. Lump sum funds delayed level annuity

D. Ordinary Level Annuity funds lump sum

E. Ordinary Level Annuity funds delayed level annuity

F. Delayed Level Annuity funds delayed level annuity

1.You plan on attending graduate school for 2 years starting 5 years from now. Each year of graduate school will cost you $25,000. You begin saving for graduate school starting 2 years from now and save for 3 years. How much must you invest each year, starting two years from now, for 3 years such that your investment will grow to just cover the cost of graduate school? Your investments earn 4% APR (compounded annually).

2.If you earn 6% per year on your investments, how much do you have to invest today to “Fund” a payment of $500 due in 3 years?

At year-end 2016, total assets for Arrington Inc. were $1.8 million and accounts payable were $305,000. Sales, which in 2016 were $2.6 million, are expected to increase by 20% in 2017. Total assets and accounts payable are proportional to sales, and that relationship will be maintained; that is, they will grow at the same rate as sales. Arrington typically uses no current liabilities other than accounts payable. Common stock amounted to $490,000 in 2016, and retained earnings were $290,000. Arrington plans to sell new common stock in the amount of $170,000. The firm's profit margin on sales is 6%; 35% of earnings will be retained. What were Arrington's total liabilities in 2016? Write out your answer completely. For example, 25 million should be entered as 25,000,000. Round your answer to the nearest cent. $ How much new long-term debt financing will be needed in 2017? Write out your answer completely. For example, 25 million should be entered as 25,000,000. Do not round your intermediate calculations. Round your answer to the nearest cent. (Hint: AFN - New stock = New long-term debt.) $

Ruben invested $1700 per year in an IRA each year for 5 years earning 13% compounded annually. At the end of 5 years he ceased the IRA payments, but continued to invest his accumulated amount at 13% compounded annually for the next 4 years. a) What was the value of his IRA at the end of 5 years? b) What was the value of the investment at the end of the next 4 years? Answer = $

Consider the following three stocks:

1. Stock A is expected to provide a dividend of $10.80 a share forever.
2. Stock B is expected to pay a dividend of $5.80 next year. Thereafter, dividend growth is expected to be 3.00% a year forever.
3. Stock C is expected to pay a dividend of $5.80 next year. Thereafter, dividend growth is expected to be 19.00% a year for five years (i.e., years 2 through 6) and zero thereafter.

a-1. If the market capitalization rate for each stock is 9.00%, what is the stock price for each of the stocks? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

a-2. Which stock is the most valuable?

• Stock A

• Stock B

• Stock C

b-1. If the market capitalization rate for each stock is 6.00%, what is the stock price for each of the stocks? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

b-2. Which stock is the most valuable?

• Stock B

• Stock C

• Stock A