Asset K has an expected return of 21 percent and a standard deviation of 36 percent. Asset L has an expected return of 9 percent and a standard deviation of 20 percent. The correlation between the assets is 0.45. What are the expected return and standard deviation of the minimum variance portfolio? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.)

Suppose your firm is considering investing in a project with the cash flows shown below, that the required rate of return on projects of this risk class is 13 percent, and that the maximum allowable payback and discounted payback statistics for your company are 2.5 and 3.0 years, respectively.

Use the NPV decision rule to evaluate this project. (Do not round intermediate calculations and round your final answer to 2 decimal places.)

The Metchosin Corporation has two different bonds currently outstanding. Bond M has a face value of $70,000 and matures in 20 years. The bond makes no payments for the first six years, then pays $2,800 every six months over the subsequent eight years, and finally pays $3,100 every six months over the last six years. Bond N also has a face value of $70,000 and a maturity of 20 years; it makes no coupon payments over the life of the bond. The required return on both these bonds is 10% compounded semiannually, what is the current price of bond M and bond N?

In Year 2 a new product is forecast to generate Earnings before Depreciation and Taxes of $30,000. Depreciation Expense associated with the product is $8,000. The company’s tax rate is 30%. Compute the after-tax cash flow for Year 2 using both the Income Statement and Tax Shield methods and show you arrive at the same result.

Acme Inc. may replace an old machine with a new, more efficient model. The old machine was purchased 5 years ago for $96,000. It is being depreciated over 8 years to zero book value using the straight-line method. Its current book value is $36,000. Its current market value is $30,000. The new machine costs $180,000. It will be depreciated over 6 years to zero book value using the straight-line method. After its useful life of 10 years it is expected to have a scrap value of $50,000. The new machine will increase Earnings before Depreciation and Taxes by $40,000 per year for 10 years. The company’s tax rate is 30% and the appropriate discount rate for this project is 10%. List all 11 after-tax cash flows for this project (0 is the initial investment). Compute the NPV. Compute the IRR and payback.

A company is considering producing long telephoto zoom lens, iLongLens, attachment for the iPhone 5. The initial investment for this project will be $3 million. This amount is for depreciable equipment, which will be depreciated over 5 years using the straight-line method to zero book value. The iLongLens is expected to generate Earnings before Depreciation and Taxes of $1.5 million per year for 6 years. At the end of the sixth year the equipment will be scrapped for $300,000. The company’s tax rate is 40% and the appropriate discount rate for this project is 15%.  

1. List all 7 after-tax cash flows for this project (0 is the initial investment).  

2. Compute the NPV.

3. Compute the IRR and payback.

Compute the Equivalent Annual Cost for the two machines described below. Assume that both do identical jobs, both will be depreciated over their useful lives using the straight line method to zero salvage value, will have zero scrap value at the end of their useful lives. Use a 10% discount rate and a 30% tax rate. Machine A Useful life 8 years Initial cost $80,000 Annual operating costs $6,500 after-tax Machine B Useful life 5 years Initial cost $35,000 Annual operating costs $8,200 after-tax

A mutual fund manager has a $90.0 million portfolio with a beta of 1.25. The risk-free rate is 3.50%, and the market risk premium is 6.00%. The manager expects to receive an additional $30.0 million which she plans to invest in a number of stocks. After investing the additional funds, she wants to reduce the portfolio’s risk level so that once the additional funds are invested the portfolio’s required return will be 11.75%. What must the average beta of the new stocks added to the portfolio be to achieve the desired required rate of return?

A $1,000 face value has a 7% annual coupon rate. The next coupon is due in one year and the bond matures in 17 years. The current YTM on the bond is 4.6%. What is the dollar value of the price change if the bond's YTM increases to 5.9%? Round to the nearest cent. ​[Hint: 1) If the price drops, the change is a negative number. 2) Do not compute duration. You can calculate the precise impact of a yield change on the bond's price by comparing the prices under the two scenarios.] --> please show how to do this by hand

1. Suppose you have a 10% bond that pays annual coupon and with mature in 10 years. The face value is $1,000, and the yield to maturity on a similar bond is 8%.         The bond is also convertible with a conversion price of 100. The stock is currently selling for $120. What is the minimum price of the bond?

2. You are considering a project that will require an initial outlay of $200,000. This project has an expected life of five years and will generate after-tax cash flows to the company as a whole of $60,000 at the end of each year over its five-year life. Thus, the free cash flows associated with this project look like this.

Given a required rate of return of 10% percent, calculate the IRR.

1. Complete below.

Sales                                           153,000

Costs                                          81,900

Other Expenses                        5,200

Depreciation                         10,900

Interest Expense                      8,400

Taxes                                          16,330

Dividends                                    7,200

New Equity                                 2,600

Redeemed LT Debt                 3,900

What is the operating cash flow?

What is the cash flow to creditors?

What is the cash flow to stockholders?

If net fixed assets increased by $20,250 during the year, what was the addition to NWC?

A 7% semiannual coupon bond matures in 6 years. The bond has a face value of $1,000 and a current yield of 7.7608%.

What is the bond's price? Do not round intermediate calculations. Round your answer to the nearest cent.


What is the bond's YTM? (Hint: Refer to Footnote 7 for the definition of the current yield and to Table 7.1.) Do not round intermediate calculations. Round your answers to two decimal places.

Financing Deficit

Stevens Textile Corporation's 2016 financial statements are shown below:

Balance Sheet as of December 31, 2016 (Thousands of Dollars)

Income Statement for January 1 - December 31, 2016 (Thousands of Dollars)

1. Suppose 2017 sales are projected to increase by 20% over 2016 sales. Use the forecasted financial statement method to forecast a balance sheet and income statement for December 31, 2017. The interest rate on all debt is 10%, and cash earns no interest income. Assume that all additional debt in the form of a line of credit is added at the end of the year, which means that you should base the forecasted interest expense on the balance of debt at the beginning of the year. Use the forecasted income statement to determine the addition to retained earnings. Assume that the company was operating at full capacity in 2016, that it cannot sell off any of its fixed assets, and that any required financing will be borrowed as a line of credit. Also, assume that assets, spontaneous liabilities, and operating costs are expected to increase by the same percentage as sales. Determine the additional funds needed. Round your answers to the nearest dollar. Do not round intermediate calculations.

   AFN	$

2. What is the resulting total forecasted amount of the line of credit? Round your answer to the nearest dollar. Do not round intermediate calculations.
   Line of credit     $
3.