Calculate the amount to be paid by the buyer of the 10-year bond 20/05/2008-2018, at a fixed interest rate of 8.60%, with a par value of 500,000,000$, with price at 98.5 on

a) 20/06/2012

b) 20/04/2013

c) 20/07/2013.

Sway's Back Store is considering a project which will require the purchase of $1 million in new equipment. The equipment will be depreciated straight-line to $200,000 over the 5-year life of the project. The first-year sale from this project is estimated at $800,000, then it keeps growing at a 5% rate. The variable cost is always 50% of the annual sales and there is an annual fixed cost of $100,000. Sway's Back Store will sell the equipment at the end of the project at a market value of $240,000. The net working capital for the project equals to 10% of sales across years. All of the net working capital will be recouped at the end of the project. The firm desires a minimal 10% rate of return on this project. The tax rate is 40%. Please calculate the NPV for this project

Nanticoke Industries had the following operating results for 2018: sales $30,420; cost of goods sold = $20,060; depreciation expense = $5,500; interest expense = $2,940; dividends paid = $1,750. At the beginning of the year, net assets were $17,410, current assets were $5,920, and current liabilities were $3,475. At the end of the year, net fixed assets were $20,960, current assets were $7,390, and current liabilities were $4,050. The tax rate for 2018 was 30 %.

a. What is net income for 2018? (Negative answers should be indicated by a minus sign. Omit $ sign in your response.)

Net income           $

b. What is the operating cash flow for 2018? (Negative answers should be indicated by a minus sign. Omit $ sign in your response.)

Operating cash flow           $

c. What is the cash flow from assets for 2018? (Negative answer should be indicated by a minus sign. Omit $ sign in your response.)

Cash flow from assets           $

d. If no new debt was issued during the year, what is the cash flow to creditors? What is the cash flow to shareholders? (Negative answers should be indicated by a minus sign. Omit $ sign in your response.)

Raymond Mining Corporation has 9.2 million shares of common stock outstanding, 360,000 shares of 5% $100 par value preferred stock outstanding, and 157,000 7.50% semiannual bonds outstanding, par value $1,000 each. The common stock currently sells for $40 per share and has a beta of 1.60, the preferred stock currently sells for $96 per share, and the bonds have 15 years to maturity and sell for 111% of par. The market risk premium is 8.0%, T-bills are yielding 5%, and Raymond Mining’s tax is 40%.

a. What is the firm’s market value capital structure? (Enter your answers in whole dollars.)

b. If Raymond Mining is evaluating a new investment project that has the same risk as the firm’s typical project, what rate should the firm use to discount the project’s cash flows? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 3 decimal places.)

Discount rate              %

18

Which of the following statements is most correct?

A bond portfolio named DEX, comprises four bonds (face value=$1000):

1)50 semi-annual bond, 5-year maturity, a coupon rate of 4%.

2)100 annual bonds, 30-year maturity, 8% coupon bond.

3)150 zero coupon bonds, 10-year maturity.

4) 200 zero coupon bonds, 20-year maturity.

YTM/discount rate: 6%

Considering DEX’s convexity, if each bond’s convexity is given as follow:

Bond 1 (semi-annual coupon bond): 23.19

Bond 2 (annual coupon bond): 212.40

Bond 3 (zero coupon bond): 98.97

Bond 4 (zero coupon bond): 107.00

Given DEX’ convexity, when the interest rate increases from 6% to 7%, the DEX’s market value should fall by?

ABC has just issued a $1,000 par value bond that will mature in 10 years. This bond pays interest of $45 every six months. If the annual yield to maturity of this bond is 7%, what is the price of the ABC bond if the market is in equilibrium?

The Taylors have purchased a $310,000 house. They made an initial down payment of $30,000 and secured a mortgage with interest charged at the rate of 7%/year on the unpaid balance. Interest computations are made at the end of each month. If the loan is to be amortized over 30 years, what monthly payment will the Taylors be required to make? (Round your answer to the nearest cent.)
$

What is their equity (disregarding appreciation) after 5 years? After 10 years? After 20 years? (Round your answers to the nearest cent.)

Masterson, Inc., has 4 million shares of common stock outstanding. The current share price is $70, and the book value per share is $9. The company also has two bond issues outstanding. The first bond issue has a face value of $75 million, has a coupon rate of 7 percent, and sells for 95 percent of par. The second issue has a face value of $60 million, has a coupon rate of 6 percent, and sells for 107 percent of par. The first issue matures in 25 years, the second in 8 years. Both bonds make semiannual coupon payments.

a. What are the company's capital structure weights on a book value basis? (Do not round intermediate calculations and round your answers to 4 decimal places, e.g., .1616.)

b. What are the company’s capital structure weights on a market value basis? (Do not round intermediate calculations and round your answers to 4 decimal places, e.g., .1616.)

c. Which are more relevant, the book or market value weights?

14. Broussard Skateboard’s sales are expected to increase by 15% from $8 million in 2013 to $9.2 million in 2014. Its assets totaled $5 million at the end of 2013. Broussard is already at full capacity, so its assets must grow at the same rate as projected sales. At the end of 2013, current liabilities were $1.4 million, consisting of $450,000 of accounts payable, $500,000 of notes payable, and $450,000 of accruals. The after-tax profit margin is forecasted to be 6%, and the forecasted payout ratio is 40%. Answer the following questions.
    2. Use the AFN equation to forecast Broussard’s additional funds needed for the coming year.
    3. What would be the additional funds needed if the company’s year-end 2013 assets had been $7 million? Assume that all other numbers, including sales, remain the same. Why is the AFN different in this scenario? Is the company’s “capital intensity” ratio the same or different?
    4. Return to the assumption that the company had $5 million in assets at the end of 2013, but now assume that the company pays no dividends. Under these assumptions, what would be the additional funds needed for the coming year? Why is this AFN different from the one in part a?

Which of the following statements is true?

Group of answer choices

If a firm has a project that management believes will be very successful, management is more likely to finance the project with debt financing than with new equity

Issuing new equity is a positive signal to investors

Issuing debt is a negative signal to investors

If a firm has a project that management believes will be very successful, management is more likely to finance the project with equity than with debt           

Abu Dhabi Diversified Holdings, Inc. has $400 in total assets, $10 million in note payable, and $50 million in long-term debt.

[a] Explain the importance of a company’s capital structure.

[b] What is the debt ratio of Abu Dhabi Diversified Holdings.

[c] Based on the capital structure of Abu Dhabi Diversified Holdings, how would you advise the company to finance its aggressive expansion plans.

You are considering a merger of two companies:

                                                Company A                             Company B

Value of Assets (MV)            $ 10 Billion                            $ 100 Billion

Debt (MV)                              $ 5 Billion                             $ 10 Billion

Maturity of Debt                          5 years                                       5 years

Volatility                                     35%                                              40%

Rf                                                  2%                                                 2%

If company B wants to buy Company A’s equity and pay off its debt as part of the merger,

(a) use the Black-Scholes model to analyze the market value of the equity and the debt of A and B before the merger

(b) If the two firms are merged and there is no synergy, and the combined firm has volatility of 32%, use the Black-Scholes model to analyze the market value of the equity and the debt of B of the combined firm

(c) does this merger makes sense for the stockholders of A and B? Explain