A one-year, $24,600, 12% note is signed on April 1. If the note is repaid on October 1 of the same year, how much interest expense is incurred? (Do not round intermediate calculations.)

$2,952

$1,476

$1,722

$1,230

The following 12%, $1,000 notes were issued on December 1. Which of the following is the correct method of calculation for the interest accrued as of December 31 of the same year on each of the notes described?

Interest on a 4-month note is calculated as: $1,000 × 12% × 1/12.

Interest on a 3-month note is calculated as: $1,000 × 12% × 1/3.

Interest on a 4-month note is calculated as: $1,000 × 12% × 1/4.

Interest on a 2-year note is calculated as: $1,000 × 12% × 1/24.

Better Mousetraps has developed a new trap. It can go into production for an initial investment in equipment of $21.6 million. The equipment will be depreciated straight line over 6 years, but, in fact, it can be sold after 6 years for $672,000. The firm believes that working capital at each date must be maintained at a level of 20% of next year’s forecast sales. The firm estimates production costs equal to $8.00 per trap and believes that the traps can be sold for $17 each. Sales forecasts are given in the following table. The project will come to an end in 6 years, when the trap becomes technologically obsolete. The firm’s tax bracket is 40%, and the required rate of return on the project is 12%.

a. What is project NPV? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Enter your answer in millions rounded to 3 decimal places.)

b. By how much would NPV increase if the firm uses double-declining balance depreciation with a later switch to straight-line when remaining project life is only two years? (Do not round intermediate calculations. Enter your answer in millions rounded to 3 decimal places.)

Talia’s Tutus bought a new sewing machine for $70,000 that will be depreciated over 5 years using double-declining-balance depreciation with a switch to straight-line.

Required:

a. Find the depreciation charge each year.

b. If the sewing machine is sold after 2 years for $44,000, what will be the after-tax proceeds on the sale if the firm’s tax bracket is 35%?

Bottoms Up Diaper Service is considering the purchase of a new industrial washer. It can purchase the washer for $7,800 and sell its old washer for $1,600. The new washer will last for 6 years and save $2,300 a year in expenses. The opportunity cost of capital is 17%, and the firm’s tax rate is 21%.

a. If the firm uses straight-line depreciation over a 6-year life, what are the cash flows of the project in years 0 to 6? The new washer will have zero salvage value after 6 years, and the old washer is fully depreciated. (Negative amounts should be indicated by a minus sign.)

b. What is project NPV? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

c. What is NPV if the firm investment is entitled to immediate 100% bonus depreciation? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Gluon Inc. is considering the purchase of a new high pressure glueball. It can purchase the glueball for $150,000 and sell its old low-pressure glueball, which is fully depreciated, for $26,000. The new equipment has a 10-year useful life and will save $34,000 a year in expenses. The opportunity cost of capital is 11%, and the firm’s tax rate is 21%. What is the equivalent annual saving from the purchase if Gluon can depreciate 100% of the investment immediately. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

You are trying to decide how much to save for retirement. Assume you plan to save $7,000 per year with the first investment made one year from now. You think you can earn 10.5​% per year on your investments and you plan to retire in  25 ​years, immediately after making your last $ 7,000 investment.

a. How much will you have in your retirement account on the day you​ retire?

The amount in the retirement account in 25years would be?(Round to the nearest​ cent.)

b.​ If, instead of investing $7,000 per​ year, you wanted to make one​ lump-sum investment today for your retirement that will result in the same retirement​ saving,

how much would that lump sum need to​ be?(Round to the nearest​ cent.)

c. If you hope to live for 25 years in​ retirement, how much can you withdraw every year in retirement​ (starting one year after​ retirement) so that you will just exhaust your savings with the 25th withdrawal​ (assume your savings will continue to earn 10.5​%

The amount you can withdraw every year in retirement is (Round to the nearest​ cent.)

in​ retirement)?d.​ If, instead, you decide to withdraw $148,000 per year in retirement​ (again with the first withdrawal one year after​ retiring), how many years will it take until you exhaust your​ savings? (Use​ trial-and-error, a financial​ calculator: solve for​ "N", or​ Excel: function​ NPER)

You will exhaust your savings in years?. (Round to two decimal​ places.)

e. Assuming the most you can afford to save is $1,400 per​ year, but you want to retire with $1,000,000 in your investment​ account, how high of a return do you need to earn on your​ investments? (Use​ trial-and-error, a financial​ calculator: solve for the interest​ rate, or​ Excel: function​ RATE)

You will need a return of ?​%(Round to two decimal​ places.)

Excel Online Structured Activity: Recapitalization

Currently, Forever Flowers Inc. has a capital structure consisting of 25% debt and 75% equity. Forever's debt currently has an 7% yield to maturity. The risk-free rate (r_RF) is 4%, and the market risk premium (r_M - r_RF) is 5%. Using the CAPM, Forever estimates that its cost of equity is currently 12%. The company has a 40% tax rate. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below. Do not round intermediate calculations.

Open spreadsheet

1. What is Forever's current WACC? Round your answer to two decimal places.

   %

2. What is the current beta on Forever's common stock? Round your answer to two decimal places.

3. What would Forever's beta be if the company had no debt in its capital structure? (That is, what is Forever's unlevered beta, b_U?) Round your answer to two decimal places.

   Forever's financial staff is considering changing its capital structure to 40% debt and 60% equity. If the company went ahead with the proposed change, the yield to maturity on the company's bonds would rise to 10%. The proposed change will have no effect on the company's tax rate.

4. What would be the company's new cost of equity if it adopted the proposed change in capital structure? Round your answer to two decimal places.

   %

5. What would be the company's new WACC if it adopted the proposed change in capital structure? Round your answer to two decimal places.

   %

6. Based on your answer to part e, would you advise Forever to adopt the proposed change in capital structure?

   _____YesNo

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Reset Problem

9. Statue Builders, Inc. took out a loan for $65,000 that has to be repaid in 10 equal annual installments. The APR on the loan is 7.25%. How much of the second payment is interest? a) $4,814.22 b) $4,712.50 c) $4,375.43 d) $4,013.92 e) $9,361.77

PLEASE SHOW ALL WORK

You are looking at an investment that has an effective annual rate of 11 percent.

A. What is the effective semiannual return?

B. What is the effective quarterly return?

C. What is the effective monthly return?

1) Small’s Internal Rate of Return (IRR) (second decimal; no rounding) is

a) 20.79%; b) 21.89%; c) 22.67%; d) 23.89%.

2) Big’s Internal Rate of Return (IRR) (second decimal; no rounding) is

a) 10.84%; b) 12.67%; c) 14.61%; d) 16.86%.

3) The incremental Internal Rate of Return (ΔIRR) between Small and Big (second decimal; no rounding) is
a) 8.15%; b) 8.96%; c) 9.90%; d) 10.13%.

4) If the company’s current motor budget is $1,000,000, which motor (s) should it purchase assuming that motors are independent investments?

a) Small, Medium and Big; b) Medium only; c) Small and Medium; d) Medium and Big.

Suppose that the index model for stocks A and B is estimated from excess returns with the following results:

R_A = 3.60% + 1.20R_M + e_A

R_B = -1.60% + 1.50R_M + e_B

σ_M = 16%; R-square_A = 0.25; R-square_B = 0.15

Assume you create portfolio P with investment proportions of 0.70 in A and 0.30 in B.
a. What is the standard deviation of the portfolio? (Do not round your intermediate calculations. Round your answer to 2 decimal places.)

b. What is the beta of your portfolio? (Do not round your intermediate calculations. Round your answer to 2 decimal places.)

c. What is the firm-specific variance of your portfolio? (Do not round your intermediate calculations. Round your answer to 4 decimal places.)

d. What is the covariance between the portfolio and the market index? (Do not round your intermediate calculations. Round your answer to 3 decimal places.)

1. For a stock with a beta coefficient of b = 1.50, it is: more volatile than the average stock. about the same volatility of an average stock. less volatile than the average stock. Cannot determine. 2. For a stock with a beta coefficient of b = 1.50, in a year when the market return is 20%, we expect, in this particular example, the stock's return to be: about 20%. about 25%. about 30%. not enough information to determine. 3. For a stock with a beta coefficient of b = 1.50, in a year when the market return is -10%, we expect, in this particular example, the stock's return to be: about 0%. about -10%. about -20%. about -30%. 4. For a stock with a beta coefficient of b = 0, which of these statements is true in this particular example? The line in the graph is flat It is like a riskless asset with a guaranteed return of 10% no matter what the market does There is no chance of lower performance than the market but also no chance of better performance. All of the above.

Zippen Industries 10.750% bonds mature December 12, 2026. The bond is callable December 12, 2022 at 5.125 call premium. The offer on the bond to settle December 12, 2015 is currently 86.374.

calculate The Yield to Maturity?

and the Yield to Call?