1. ABC Inc., and XYZ Inc., both have 7% coupon bonds outstanding, with semiannual interest payments, and both are currently priced at the par value of $1000. The ABC Inc., bond has 4 years to maturity, whereas the XYZ Inc., bond 25 years maturity. If interest rates suddenly rise by 2 percent, what is the percentage change in the price of these bonds? If interest rates were to suddenly fall by 2% instead, what would the percentage change in the price of these bonds be then? Illustrate your answers by graphing bond prices versus YTM. What does this problem tell you about the interest rate risk of longer-term bonds

Abascus limited issued 15 year, 14% bonds five years ago. The bond which has a face value of Rs. 100 is currently selling for Rs. 108.

a. What is the pre tax cost of debt?

b. What is the after tax cost of debt.

1) The yield on a one-year Treasury security is 4.9200%, and the two-year Treasury security has a 6.6420% yield. Assuming that the pure expectations theory is correct, what is the market’s estimate of the one-year Treasury rate one year from now?

2) Recall that on a one-year Treasury security the yield is 4.9200% and 6.6420% on a two-year Treasury security. Suppose the one-year security does not have a maturity risk premium, but the two-year security does and it is 0.35%. What is the market’s estimate of the one-year Treasury rate one year from now?

3) Suppose the yield on a two-year Treasury security is 4.0%, and the yield on a five-year Treasury security is 5.7%. Assuming that the pure expectations theory is correct, what is the market’s estimate of the three-year Treasury rate two years from now?

How does Costco compare to Sam's Club Financially? Which is doing better?

East side Corporation is expected to pay the following dividends over the next four years: $12, $8, $7, and $2.85. Afterward, the company pledges to maintain a constant 5 percent growth rate in dividends forever. If the required return on the stock is 12 percent, what is the current price?

Compare and examine the similarities and differences between digital and branch banking.

Provide examples of 'Phygital' and evaluate how banks are implementing them.

2. You want to purchase a house: your maximum monthly payment is $1,600, and you also have a saving of $35,000 as the down payment. You apply for a 30-year fixed mortgage loan with APR 4.49%. What is the maximum house price you can afford to buy?

NEW PROJECT ANALYSIS

Q:

You must evaluate the purchase of a proposed spectrometer for the R&D department. The base price is $290,000, and it would cost another $72,500 to modify the equipment for special use by the firm. The equipment falls into the MACRS 3-year class and would be sold after 3 years for $130,500. The applicable depreciation rates are 33%, 45%, 15%, and 7%. The equipment would require a $14,000 increase in net operating working capital (spare parts inventory). The project would have no effect on revenues, but it should save the firm $45,000 per year in before-tax labor costs. The firm's marginal federal-plus-state tax rate is 40%.

1. What is the initial investment outlay for the spectrometer, that is, what is the Year 0 project cash flow? Round your answer to the nearest cent. Negative amount should be indicated by a minus sign.
   $

2. What are the project's annual cash flows in Years 1, 2, and 3? Round your answers to the nearest cent.

   In Year 1 $

   In Year 2 $

   In Year 3 $

3. If the WACC is 11%, should the spectrometer be purchased?
   -Select- Yes or No

Consider the utility function U(W) = W^0.5 where W = wealth

a) Perform the necessary calculations to demonstrate the order of preference of an investor with this utility function. Order them from most preferred to least preferred.

-Prospect 1: 50% chance of $1000, 50% chance of $2000

-Prospect 2: 25% chance of $500, 25% chance of $2000, 50% chance of $1000

-Prospect 3: $1000 for certain.

b) Explain the meaning of the expression certainty equivalent. (That is, Provide the definition)

c) Calculate the certainty equivalent of prospect 1.

xyz co. wants to issue new 25 year bonds for some much needed expansion projects. The company currently has 4.9% coupon bonds on the market that sells for 1123,make semiannual payments, have a 1000 par value and mature in 19 years. What coupon rate should the company set on its new bonds if it wants to sell them at par?

TASKS 3: Use the following financial statements of Precise Company to answer the requirements. Precise Company Comparative Income Statements For the year ended 31 December 2018 and 2017 2018 2017 Sales RM2,486,000 RM2,075,000 Cost of goods sold 1,523,000 1,222,000 Gross profit 963,000 853,000 Operating expenses: Advertising 145,000 100,000 Staff salaries 240,000 280,000 Office salaries 165,000 200,000 Insurance 100,000 45,000 Supplies expense 26,000 35,000 Depreciation 85,000 75,000 Miscellaneous 17,000 15,000 Total operating expenses 778,000 750,000 Operating profit 185,000 103,000 Interest expense 44,000 46,000 Profit before tax 141,000 57,000 Income tax expense 47,000 19,000 Net profit RM94,000 RM38,000 Earnings per share RM0.99 RM0.99 Precise Company Comparative Statements of Financial Position As at 31 December 2018 and 2017 Assets RM RM Current Assets: Cash 79,000 42,000 Short-term investments 65,000 96,000 Accounts receivable 120,000 100,000 Merchandise inventory 250,000 265,000 Total current assets 514,000 503,000 Property, plant and equipment Store equipment 400,000 350,000 Office equipment 45,000 50,000 Buildings 625,000 675,000 Land 100,000 100,000 Total property, plant and equipment 1,170,000 1,175,000 Total assets RM1,684,000 RM1,678,000 Liabilities Current liabilities: Accounts payable 164,000 190,000 Short-term notes payable 75,000 90,000 Taxes payable 26,000 12,000 Total current liabilities 265,000 292,000 Long-term liabilities: Notes payable (secured by mortgage on buildings) 400,000 420,000 Total liabilities 665,000 712,000 Shareholders’ equity Share capital 475,000 475,000 Retained earnings 544,000 491,000 Total shareholders’ equity 1,019,000 966,000 Total liabilities and equity RM1,684,000 RM1,678,000 Required: a) Prepare common-size comparative statements of financial position for years 2018 and 2017. (10) b) Compute the following ratios as at 31 December 2017 and 2018 and compare the performance based on the ratios computed. i. Current ratio ii. Acid test ratio iii. Accounts receivable turnover iv. Inventory turnover v. Accounts payable turnover vi. Days’ sales uncollected vii. Total asset turnover viii. Debt ratio ix. Equity ratio x. Profit margin ratio (20) (Total: 30 marks)

1. You just got a job.  You ask for a loan from your parents to pay for day to day expenses.  Your parents agreed to lend you the money if you agree to pay them back within six months at an interest rate of 3%.  You can pay them $100 at the end of the first two months, $125 for months 3 and 4 and $150 for months 5 and 6.  Calculate the present value.

1. $695.03                b)  $671.81                  c) $765.35                   d)  $742.98   

Halliford Corporation expects to have earnings this coming year of

$ 2.889$2.889

per share. Halliford plans to retain all of its earnings for the next two years.​ Then, for the subsequent two​ years, the firm will retain

52 %52%

of its earnings. It will retain

19 %19%

of its earnings from that point onward. Each​ year, retained earnings will be invested in new projects with an expected return of

25.2 %25.2%

per year. Any earnings that are not retained will be paid out as dividends. Assume​ Halliford's share count remains constant and all earnings growth comes from the investment of retained earnings. If​ Halliford's equity cost of capital is

9.3 %9.3%​,

what price would you estimate for Halliford​ stock?

At what levels in the organization are the budgets developed? Which types of leaders participate in the process?