Carling Corporation will raise $1,000,000 to finance an expansion. They plan to raise $500,000 through the sale of bonds, $ 50,000 by issuing preferred stock, $300,000 by issuing Common stock and $150,000 by using retained earnings. (you are going to need this total) The company will have to contract with an investment banker to issue bonds, new preferred stock and new common stock. The firm uses the CAPM approach to value retained earnings, but is willing to consider other options. Its bonds sell for $1,000 have a 9% coupon rate, mature in 20 years and will incur a floatation cost of 4% per bond. The firm could sell, at par, $100 preferred stock which pays a 6% annual dividend, with flotation costs of 5%. Carling's beta is 1.1, the Return on Government Notes is 6%, and the market return is 12%. Carling has a growth rate of 8% and its current stock price $24.00 with recent dividends of $2.00, per share. Floatation costs are 6% on new issues. The firm's policy is to use a risk premium of 5.3% When using the bond-yield-plus-risk-premium method to value Retained earnings. The firm's marginal tax rate is 40%.

What would be the cost of using retained earnings if the company used the bond-yield-plus-risk-premium method?

a) 10.87

b)14.75

c) 10.32

d) 12.60

e)7.62

f)5.67

G) 6.32

H)17.57

I) 9.45

What is the cost of using retained earnings valued using the CAPM?. What is the cost of issuing common stock?

a) 10.87

b)14.75

c) 10.32

d) 12.60

e)7.62

f)5.67

G) 6.32

H)17.57

I) 9.45

What is the cost of issuing Preferred stock? What is the cost of using bond to finace the expansion?

a) 10.87

b)14.75

c) 10.32

d) 12.60

e)7.62

f)5.67

G) 6.32

H)17.57

I) 9.45

Calculate the WACC.

a) 10.87

b)14.75

c) 10.32

d) 12.60

e)7.62

f)5.67

G) 6.32

H)17.57

I) 9.45

You enter into a short position in one gold futures contract worth $500 per ounce. Contract size is 100 ounces. The initial margin is $2,500 per contract and the maintenance margin is $1,500 per contract. If the market closes at $497.50 per ounce at the end of the day, what is the balance on your margin account?

Consider an index consisting of the following stocks: P0 P1 shares (m) ABC 90 100 10 CBA 50 35 20 Calculate the value-weighted return on the index! -9.44% -10.53% -3.57% 11.54%

Derek decides that he needs $101,702.00 per year in retirement to cover his living expenses. Therefore, he wants to withdraw $101702.0 on each birthday from his 66th to his 85.00th. How much will he need in his retirement account on his 65th birthday? Assume a interest rate of 10.00%.

Submit

Answer format: Currency: Round to: 2 decimal places.

unanswered

not_submitted

#2

Derek plans to retire on his 65th birthday. However, he plans to work part-time until he turns 74.00. During these years of part-time work, he will neither make deposits to nor take withdrawals from his retirement account. Exactly one year after the day he turns 74.0 when he fully retires, he will wants to have $3,480,498.00 in his retirement account. He he will make contributions to his retirement account from his 26th birthday to his 65th birthday. To reach his goal, what must the contributions be? Assume a 8.00% interest rate.

Submit

Answer format: Currency: Round to: 2 decimal places.

unanswered

not_submitted

#3

Derek plans to retire on his 65th birthday. However, he plans to work part-time until he turns 70.00. During these years of part-time work, he will neither make deposits to nor take withdrawals from his retirement account. Exactly one year after the day he turns 70.0 when he fully retires, he will begin to make annual withdrawals of $125,076.00 from his retirement account until he turns 85.00. He he will make contributions to his retirement account from his 26th birthday to his 65th birthday. To reach his goal, what must the contributions be? Assume a 7.00% interest rate.

Submit

Answer format: Currency: Round to: 2 decimal places.

unanswered

not_submitted

#4

Derek plans to retire on his 65th birthday. However, he plans to work part-time until he turns 72.00. During these years of part-time work, he will neither make deposits to nor take withdrawals from his retirement account. Exactly one year after the day he turns 72.0 when he fully retires, he will begin to make annual withdrawals of $166,805.00 from his retirement account until he turns 88.00. After this final withdrawal, he wants $1.55 million remaining in his account. He he will make contributions to his retirement account from his 26th birthday to his 65th birthday. To reach his goal, what must the contributions be? Assume a 5.00% interest rate.

Submit

Answer format: Currency: Round to: 2 decimal places.

unanswered

not_submitted

#5

A bank offers 8.00% on savings accounts. What is the effective annual rate if interest is compounded semi-annually?

Submit

Answer format: Percentage Round to: 4 decimal places (Example: 9.2434%, % sign required. Will accept decimal format rounded to 6 decimal places (ex: 0.092434))

unanswered

not_submitted

#6

Derek has the opportunity to buy a money machine today. The money machine will pay Derek $34,503.00 exactly 3.00 years from today. Assuming that Derek believes the appropriate discount rate is 5.00%, how much is he willing to pay for this money machine?

Submit

Answer format: Currency: Round to: 2 decimal places.

unanswered

not_submitted

#7

Assume the nominal rate of return is 6.42% and the inflation rate is 1.53%. Find the real rate of return using the exact formula.

Submit

Answer format: Percentage Round to: 0 decimal places (Example: 9%, % sign required. Will accept decimal format rounded to 2 decimal places (ex: 0.09))

A short seller has sold 300 shares at $210 per share with an initial margin of 60%. A few days later the stock paid $4 dividends per share. What is the profit to the short seller if the share price is now $180? 10,200 7,800 9,000 -10,200

A mutual fund charges 6% front-end load and 3% operating and 12b-1 expenses. At the beginning of the year, the fund has $200 million assets under management and 10 million shares outstanding. During the year the value of assets held by the fund increases by 10% and the fund receives dividends of $2 million. What is the fund's NAV at the end of the year? (The number of mutual fund shares outstanding is still 10 million at the end of the year.) $20.06 $20 $21.54 $21.34

Novell, Inc., has the following mutually exclusive projects.

Year Project A. Project B

__ __

0 22, 000 25,000

1 13,000 14,000

2 9,500 10,500   

3 3,100 9,500

a-1. Calculate the payback period for each project. (Do not round intermediate calculations and round your answers to 3 decimal places, e.g. 32.161.)

Project A. _____ years

Project B ______ years

a-2. If the company's payback period is two years, which, if either, of these projects should be chosen? (Choose the correct answer)

Project A

Project B

Both Projects

Neither project

b-1. What is the NPV for each project if the appropriate discount rate is 16 percent? (A negative answer should be indicated by a minus sing. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

Project A. ______

Project B. _______

b-2. Which, if either, of these projects should be chosen if the appropriate discount rate is 16 percent? (Choose the correct answer)

Project A

Project B

Both projects

Neither project

The following are the cash flows of two projects:

a. If the opportunity cost of capital is 12%, calculate the NPV for both projects. (Do not round intermediate calculations. Round your answers to 2 decimal places.)

b. Which of these projects is worth pursuing?

****NOTE**** You are finding the NPV, NOT the Profitability index!

Le Pew cosmetics is evaluating a new fragrance mixing machine. The machine requires an initial investment of $360,000 and will generate after tax cash flows of $62,650 per year for 8 years. For each of the capital listed, 1) calculate net present value (NPV) 2) indicate whether to accept or reject the machine and why.

a)cost of capital is 6%

b)cost of capital is 8%

c)cost of capital is 10%

Suppose you are bearish (pessimistic) on Dot Bomb stock, and its market price is $100 per

share. You tell your broker to sell short 1,000 shares.

(1) Suppose the broker has a 50% margin requirement on short sales and you put $50,000

in your account as margin. What will your percentage prot be if you close out your

position when Dot Bomb falls to $70 per share?

(2) Suppose the broker has a maintenance margin of 30% on short sales. How much can

the price of Dot Bomb stock rise before you get a margin call?

I'm in Corporate Finance course and I am struggling in a question of bond valuation. Face Value = $1,000.00, Annually coupon rate = 7%, Initial market interest rate = 9%, YTM = 10, Payment per year = 1, Hence, Price value = $871.65.

I have to make a table of bond valuation which shows the impact of changes in interest rate over the life of a bond for each year of maturity. The value of the bond, year by year, from date of issue until its maturity, assuming that market interest rate increases by 1.5% (hence yield to maturity increases by 1.5%), all other things remain the same.

Intro

The real short-term risk-free rate is 0.5% and expected to stay constant. The inflation rate is expected to be 1.4% this year, 2% for each of the following 5 years, and 2.5% thereafter. The maturity risk premium is expected to be 0.0004 * T, where T is the number of years to maturity.

Attempt 2/5 for 10 pts.

Part 1

What is the expected yield on a 1-year Treasury bill?

Part 2

What is the expected yield on a 3-year Treasury note?

Part 3

What is the expected yield on a 30-year Treasury bond?

Interest rate for an annuity Personal Finance problem: Anna Waldheim was seriously injured in an industrial accident. She sued the responsible parties and was awarded a judgment of $1,000,000. Today, she and her attorney are attempting a settlement conference with the defendants. The defendants have$124,made an initial offer of $72,649 per year for 30 years. Anna plans to counteroffer at $124,144 per year for 30 years. Both the offer and the counteroffer have a present value of $1,000,000, the amount of the judgment. Both assume payments at the end of each year.

a) what interest rate assumption have the defendents used in their offer (round to nearest whole percent) = 6%

b)what interest rate assumption have Anna and her lawyer used in their counteroffer (round to nearest whole perecent)? =12%

c) Anna is willing to settle for an annuity that carries an interest rate assumption of 9%. What annual payment would be acceptable to her?

C: If Anna is willing to settle for an annuity that carries an interest rate assumption of 9%, she would be willing to accept an payment of $...............(round to the nearest dollar). My answer of $97,336 was incorrect. What is the correct answer for this problem?

Thanks for your help!

Dée Trader opens a brokerage account and purchases 100 shares of Internet Dreams at $54 per share. She borrows $2,600 from her broker to help pay for the purchase. The interest rate on the loan is 11%. a. What is the margin in Dée’s account when she first purchases the stock? b. If the share price falls to $44 per share by the end of the year, what is the remaining margin in her account? (Round your answer to 2 decimal places.) c. If the maintenance margin requirement is 30%, will she receive a margin call? Yes No d. What is the rate of return on her investment? (Negative value should be indicated by a minus sign. Round your answer to 2 decimal places.)

On January 1, you sold short one round lot (that is, 100 shares) of Lowe's stock at $27.70 per share. On March 1, a dividend of $3.30 per share was paid. On April 1, you covered the short sale by buying the stock at a price of $22.00 per share. You paid 25 cents per share in commissions for each transaction. a. What is the proceeds from the short sale (net of commission)? b. What is the dividend payment? c. What is the total cost, including commission, if you have to cover the short sale by buying the stock at a price of $22.00 per share? d. What is the net gain from your transaction?