Compute the price of a $1,000 par value, 11 percent (semi-annual payment) coupon bond with 22 years remaining until maturity assuming that the bond's yield to maturity is 17 percent? (Round your answer to 2 decimal places and record your answer without dollar sign or commas).

You are considering a 15-year, $1,000 par value bond. Its coupon rate is 8%, and interest is paid semiannually. If you require an "effective" annual interest rate (not a nominal rate) of 7.6420%, how much should you be willing to pay for the bond? Do not round intermediate calculations. Round your answer to the nearest cent.

$________

Lourdes Corporation's 12% coupon rate, semiannual payment, $1,000 par value bonds, which mature in 30 years, are callable 4 years from today at $1,075. They sell at a price of $1,252.76, and the yield curve is flat. Assume that interest rates are expected to remain at their current level.

What is the best estimate of these bonds' remaining life? Round your answer to the nearest whole number._____years

If Lourdes plans to raise additional capital and wants to use debt financing, what coupon rate would it have to set in order to issue new bonds at par?

1. Since Lourdes wishes to issue new bonds at par value, the coupon rate set should be the same as that on the existing bonds.
2. Since Lourdes wishes to issue new bonds at par value, the coupon rate set should be the same as the current yield on the existing bonds.
3. Since interest rates have risen since the bond was first issued, the coupon rate should be set at a rate above the current coupon rate.
4. Since the bonds are selling at a premium, the coupon rate should be set at the going rate, which is the YTC.
5. Since the bonds are selling at a premium, the coupon rate should be set at the going rate, which is the YTM.

You are evaluating a proposed expansion of an existing subsidiary located in Switzerland. The cost of the expansion would be SF21 million. The cash flows from the project would be SF5.5 million per year for the next five years. The dollar required return is 12 percent per year, and the current exchange rate is SF1.07. The going rate on Eurodollars is 6 percent per year. It is 3 percent per year on Swiss francs. a. Convert the projected franc flows into dollar flows and calculate the NPV. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. Enter your answer in dollars, not in millions, e.g., 1,234,567.) NPV $ b-1. What is the required return on franc flows? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Return on franc flows % b-2. What is the NPV of the project in Swiss francs? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. Enter your answer in francs, not in millions, e.g., 1,234,567.) NPV SF b-3. What is the NPV in dollars if you convert the franc NPV to dollars? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. Enter your answer in dollars, not in millions, e.g., 1,234,567.) NPV $

1. Is cost of capital of a firm determined by the source of the funds or the use of funds? Explain.
2. What are the advantages and disadvantages of using CAPM to calculate cost of equity.
3. The Gordon Growth Model can be used to estimate cost of equity. Why is this method not ideal?
4. Explain how you would calculate beta of a stock.
5. Can a firm’s beta change over time? How would you adjust your calculation of beta to reflect a change of business?
6. Why is the coupon rate of a bond not used for calculating cost of debt?
7. Why do we prefer to use market value weights of debt and equity when calculating WACC?
8. A firm has preferred shares and multiple bond issues. How do you adjust your WACC calculation?
9. When is it appropriate to use WACC as the discount rate when determining the NPV of a project?
10. What is a consequence of using WACC as the discount rate for all projects of a firm?

On January 1, 2018, Luplow Corp issued 5-year bonds with a total face value of $6,000,000 and a stated/contract interest rate of 3%. Interest on the bonds is paid annually on December 31 of each year of the bond’s life. The bonds are issued to provide an effective (market) interest rate of 3.5%

The cash proceeds from issuing the bonds on 1/1/18 is

The amount of interest expense recognized in Luplow’s 2019 income statement is

The bonds carrying value (book value) reported in Luplow’s year-end 12/31/20 balance sheet

The amount of interest expense recognized in Luplow’s 2021 income statement is

What is the total interest expense recognized over the entire life of the bonds?

Your firm needs new equipment that costs $80,000 and requires $20,000 in maintenance for each year of its three year life. After three years, the salvage value will be zero. The machine falls into the Class 10 equipment category (CCA rate 30%). Assume a tax rate of 34% and a discount rate of 10%. Compute the depreciation tax shield for year 3. *Note: A CCA table is required for this question. PVCCATS does not apply.

The Neal Company wants to estimate next year's return on equity (ROE) under different financial leverage ratios. Neal's total capital is $18 million, it currently uses only common equity, it has no future plans to use preferred stock in its capital structure, and its federal-plus-state tax rate is 40%. The CFO has estimated next year's EBIT for three possible states of the world: $4.6 million with a 0.2 probability, $2.4 million with a 0.5 probability, and $0.4 million with a 0.3 probability. Calculate Neal's expected ROE, standard deviation, and coefficient of variation for each of the following debt-to-capital ratios. Do not round intermediate calculations. Round your answers to two decimal places at the end of the calculations.

3. What is the weighted average cost of capital (WACC) and provide the equation when long-term debt and common equity are used to obtain capital funds? Please describe each component and how you measure each? How does a higher beta affect WACC and why? How does a drop in the bond market effect WACC and why? What is the WACC for a public utility given the following information: beta: 0.8, expected rate of return on the S&P 500: 12.4%, risk-free rate (T-bill yield): 4%, yield to maturity on long-term bonds: 7.2%, required rate of return on preferred stock: 7.5%, common equity ratio: 60%, debt ratio: 30%, preferred stock ratio: 10% and an effective corporate tax rate: 30%.

1. Please explain why money has a time value. Please interpret the present and future value of a series of future cash flows.   What is the effective rate of return? Would you prefer more frequent compounding or less and why?

Considering platforms such as Airbnb and Uber, how will the sharing economy affect employment? And how should businesses adapt to the sharing economy?

You are attempting to value a call option with an exercise price of $145 and one year to expiration. The underlying stock pays no dividends, its current price is $145, and you believe it has a 50% chance of increasing to $155 and a 50% chance of decreasing to $135. The risk-free rate of interest is 5%. Based upon your assumptions, calculate your estimate of the the call option's value using the two-state stock price model. Answer is not $4.76

1. Cash Budgeting

Dorothy Koehl recently leased space in the Southside Mall and opened a new business, Koehl's Doll Shop. Business has been good, but Koehl frequently run out of cash. This has necessitated late payment on certain orders, which is beginning to cause a problem with suppliers. Koehl plans to borrow from the bank to have cash ready as needed, but first she needs a forecast of how much she should borrow. Accordingly, she has asked you to prepare a cash budget for the critical period around Christmas, when needs will be especially high.

Sales are made on a cash basis only. Koehl's purchases must be paid for during the following month. Koehl pays herself a salary of $4,100 per month, and the rent is $2,300 per month. In addition, she must make a tax payment of $12,000 in December. The current cash on hand (on December 1) is $250, but Koehl has agreed to maintain an average bank balance of $4,000 - this is her target cash balance. (Disregard the amount in the cash register, which is insignificant because Koehl keeps only a small amount on hand in order to lessen the chances of robbery.)

The estimated sales and purchases for December, January, and February are shown below. Purchases during November amounted to $120,000.

1. Prepare a cash budget for December, January, and February.

   I. Collections and Purchases:
   	December	January	February
   Sales	$	$	$
   Purchases	$	$	$
   Payments for purchases	$	$	$
   Salaries	$	$	$
   Rent	$	$	$
   Taxes	$	---	---
   Total payments	$	$	$
   Cash at start of forecast	$	---	---
   Net cash flow	$	$	$
   Cumulative NCF	$	$	$
   Target cash balance	$	$	$
   Surplus cash or loans needed	$	$	$

2. Suppose Koehl starts selling on a credit basis on December 1, giving customers 30 days to pay. All customers accept these terms, and all other facts in the problem are unchanged. What would the company's loan requirements be at the end of December in this case? (Hint: The calculations required to answer this part are minimal.)
   $

A Treasury note has 9 years till maturity is quoted at 96:17 with a 4.25% coupon. The bond pays interest semiannually. What is the yield to maturity on the bond?