Sarah obtains a 30-year loan at an annual fixed rate of 8% on a $220,000 house where the required down payment is 15% of the house value. What is Sarah's monthly mortgage payment?

Cost Benefit Analysis over 10 years

Do a cost benefit analysis to decide wheteher to switch from a gas car to an electric car.

HINT: Make cash flow table for 10 years reflecting the total savings of switching from gas car to electric car

The government is offering an incentive of $11,000 for trading your gas car in and buying an electric vehicle

Assume that cost of gas will increase by 5% each year

You must include NPV and IRR for both comparisons in excel AND make a reccommendation

Interest rate = 4.50%

(you are free to make any other assumtions or rates you make, but be sure to clearly list them)

Consider the following.

a. What is the duration of a two-year bond that pays an annual coupon of 9 percent and whose current yield to maturity is 14 percent? Use $1,000 as the face value. (Do not round intermediate calculations. Round your answer to 3 decimal places. (e.g., 32.161))
b. What is the expected change in the price of the bond if interest rates are expected to decrease by 0.2 percent? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places. (e.g., 32.16))

a. duration of bond

b. expected change in the price

It is now January 1, 2019, and you are considering the purchase of an outstanding bond that was issued on January 1, 2017. It has a 9.5% annual coupon and had a 20-year original maturity. (It matures on December 31, 2036.) There is 5 years of call protection (until December 31, 2021), after which time it can be called at 108—that is, at 108% of par, or $1,080. Interest rates have declined since it was issued, and it is now selling at 120.08% of par, or $1,200.80.

1. What is the yield to maturity? Do not round intermediate calculations. Round your answer to two decimal places.

     %

   What is the yield to call? Do not round intermediate calculations. Round your answer to two decimal places.

     %

2. If you bought this bond, which return would you actually earn?
   1. Investors would not expect the bonds to be called and to earn the YTM because the YTM is less than the YTC.
   2. Investors would expect the bonds to be called and to earn the YTC because the YTC is less than the YTM.
   3. Investors would expect the bonds to be called and to earn the YTC because the YTC is greater than the YTM.
   4. Investors would not expect the bonds to be called and to earn the YTM because the YTM is greater than the YTC.
3. Suppose the bond had been selling at a discount rather than a premium. Would the yield to maturity have been the most likely return, or would the yield to call have been most likely?
   1. Investors would expect the bonds to be called and to earn the YTC because the YTC is less than the YTM.
   2. Investors would not expect the bonds to be called and to earn the YTM because the YTM is greater than the YTC.
   3. Investors would not expect the bonds to be called and to earn the YTM because the YTM is less than the YTC.
   4. Investors would expect the bonds to be called and to earn the YTC because the YTC is greater than the YTM.

Following table is the data of past dividend payments.



　 dividend (in millions)
2012 $1.00
2013 $1.50
2014 $2.00
2015 $2.35
2016 $3.15
2017 $4.00
2018 $4.65
2019 $5.25
2020 $5.96


Using the past dividend data, you will forecast the future growth rate.

The most recent dividend paid by New Technologies was an annual dividend of $5.96 million in total and there are 20 million shares outstanding .

Assume T-bill rate is 3%, S&P500 market return is 7%, beta of New Technologies is 0.88.



#1. What is the appropriate discount rate (required rate of return)?

#2. You forecast that future dividends will grow for 3 years at the geometric average of historical dividend growth rate using the data given. What is the geometric average of historical dividend growth rate?

#3. You assume that dividends for the next 3 years will be increased at the rate you just calculated from #2. After that, you assume dividends are expected to increase by 4% each year forever. What should be today’s stock price per share?

#4. If the H-model is applied to the above question, at what rate should the growth rate decline each year to reach the constant growth rate of 4%?

#5. Using the H-model, what should be the stock price per share today?




#1. k = 5.54%


#1. k = 6.52%


#1. k = 9.24%


#2. geometric avg growth rate = approx. 25%


#2. geometric avg growth rate = approx. 21%


#2. geometric avg growth rate = approx. 28%


#3. approx. $15.50 per share


#3. approx. $40.30 per share


#3. approx. $21.10 per share


#4. each year it should decline by 5% per year


#4. each year it should decline by 7% per year


#4. each year it should decline by 9% per year


#5. approx. $17.80 per share


#5. approx. $20.90 per share


#5. approx. $15.20 per share

1. What is the net change (net purchase or sale) in Property, Plant and Equipment account in 2018 given the following information?

2017 Net Property, Plant and Equipment Balance = 14,300,000

2018 Net Property, Plant and Equipment Balance = 12,850,000

2018 Total Accumulated Depreciation Balance = 5,650,000

2018 Depreciation Expense = 1,150,000

Group of answer choices

a. 1,450,000 net purchase

b. 1,450,000 net sale

c. 300,000 net purchase

d. 300,000 net sale

2. Using the balance sheet accounts below, what is the firm's Long Term Debt Ratio?

Cash = 12,300,000

Accounts Receivable = 6,700,000

Inventory = 5,000,000

Fixed Assets = 21,000,000

Current Portion of Long Term Debt = 3,900,000

Accounts Payable = 1,700,000

Long Term Bonds = 29,000,000

Common Stock = 6,000,000

Retained Earnings = 4,400,000

Group of answer choices

a. 73.60%

b. 76.89%

c. 75.98%

d. 64.44%

1,You plan to invest $50,000 at the end of year 2019, $60,000 at the end of year 2020 and $90,000 at the end of year 2021. If you earn 3.8% annual rate of return, how much will you have at the end of 2021? Round to the nearest whole dollar.

2. An investment will pay you $240,000 at the end of 10 years. At an annual rate of 15% (compounded semi-annually), what is the price of this investment today? Round to the nearest whole dollar.

a.2,446,678

b. 59,324

c. 116,447

d. 56,499

assume the assets are 1500,000, current liabilities are 250,000, inventory is 50,000, total debt is 1200,000and total assets are 3,500,000. Compute the liquidity and leverage ratios for this organization. Assume the net sales for the organization are 1750,000. Compute the asset turnover activity ratio. comment 1-2 sentence regarding the health of the organization based upon your computations

NPV gives a profit (discounted revenues minus discounted costs) for a project. IRR gives the rate of return on the initial investment a project produces. Both are rational criteria, but depending on the situation one may give a clearer picture of the opportunities of a project compared to the other. Discuss with examples to support your arguments.

Emperor’s Clothes Fashions can invest $4 million in a new plant for producing invisible makeup. The plant has an expected life of 5 years, and expected sales are 5 million jars of makeup a year. Fixed costs are $3.7 million a year, and variable costs are $2.40 per jar. The product will be priced at $3.80 per jar. The plant will be depreciated straight-line over 5 years to a salvage value of zero. The opportunity cost of capital is 10%, and the tax rate is 40%. a. What is project NPV under these base-case assumptions? (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.) b. What is NPV if variable costs turn out to be $2.60 per jar? (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.) c. What is NPV if fixed costs turn out to be $3.6 million per year? (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.) d. At what price per jar would project NPV equal zero? (Enter your answer in dollars not in millions. Do not round intermediate calculations. Round your answer to 2 decimal places.)

Consider the following.

a. What is the duration of a two-year bond that pays an annual coupon of 9 percent and whose current yield to maturity is 14 percent? Use $1,000 as the face value. (Do not round intermediate calculations. Round your answer to 3 decimal places. (e.g., 32.161))
b. What is the expected change in the price of the bond if interest rates are expected to decrease by 0.2 percent? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places. (e.g., 32.16))

Zippen Industries 9.250% bonds mature August 2, 2028. The bond is callable August 2, 2019 at 5.125 call premium. The offer on the bond to settle August 2, 2015 is currently 107.884

The Yield to Maturity is %

and the Yield to Call is %

1.For project A in year 2, inventories decrease by €5000 and accounts payable increase by €1500. Accounts receivable remain the same. Calculate the increase or decrease in net working capital for year 2.

2. You would like to have enough money saved to receive $100000 per year in perpetuity after retirement for you and your heirs. How much would you need to have saved in your retirement fund to achieve this goal? (Assume that the perpetuity payments start one year from the date of your retirement. The annual interest rate is 5 percent.)

3. The market value of Cable Company's equity is $25 million and the market value of its debt is $15 million. If the required rate of return on the equity is 13 percent and that on its debt is 5 percent, calculate the company's cost of capital. (Assume no taxes.)

4. LOWTEC Sustainable AG is a German company specialized in energy-efficient technology for buildings. Given are the following estimated data for year 2017: Profit after taxes = €35 million; Depreciation = €28 million; Investment in fixed assets = $50 million; Investment net working capital = $4 million. Calculate the estimated free cash flow (FCF) for year 2017

5. The market value of Greenergy ltd equity is $130 million and the market value of its debt is $40 million. If the required rate of return on the equity is 18 percent and that on its debt is 5 percent, calculate the company's cost of capital. (Assume no taxes.)