You find the following Treasury bond quotes. To calculate the number of years until maturity, assume that it is currently May 2016. The bonds have a par value of $1,000.

In the above table, find the Treasury bond that matures in May 2041. What is the asked price of this bond in dollars? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Asked price            $

If the bid-ask spread for this bond is .0654, what is the bid price in dollars? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Bid price            $

You find the following corporate bond quotes. To calculate the number of years until maturity, assume that it is currently January 15, 2016. The bonds have a par value of $2,000. Company (Ticker) Coupon Maturity Last Price Last Yield EST $ Vol (000’s) Xenon, Inc. (XIC) 6.200 Jan 15, 2028 94.263 ?? 57,370 Kenny Corp. (KCC) 7.200 Jan 15, 2027 ?? 5.30 48,949 Williams Co. (WICO) ?? Jan 15, 2034 94.815 7.00 43,810 What price would you expect to pay for the Kenny Corp. bond? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Price $ What is the bond’s current yield? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Current yield %

You find the following Treasury bond quotes. To calculate the number of years until maturity, assume that it is currently May 2016. The bonds have a par value of $1,000. Rate Maturity Mo/Yr Bid Asked Chg Ask Yld ?? May 19 103.5371 103.6249 +.3209 2.189 5.901 May 24 104.4861 104.6318 +.4209 ?? 6.128 May 34 ?? ?? +.5314 3.891 In the above table, find the Treasury bond that matures in May 2019. What is the coupon rate for this bond? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Coupon rate %

3. The SSR Co., currently all-equity firm, is planning to build a factory. The beta, systematic risk, of this project alone is 15% less than they currently manage. The beta of the assets currently managed is 1.5. The corporate tax rate the firm faces is 34%. The company has a target debt-to-equity ratio of 3/7. The initial investment cost is $30 million and the expected operating after-tax cash flows are $10 million per year for five years. The risk-free rate is 3% and the historical market risk premium of 8% is a reasonable estimate.

a. What is the all-equity value of this investment?

b. If the company finances it with a five-year non-amortizing loan with 11% interest, should it accept the project (USE APV approach)?

c. If the local government approaches the SSR Co. with an offer to loan the needed amount in b at 8%, should the company accept this offer?

​(Cost of a​ short-term bank loan​) Jimmy Hale is the owner and operator of the grain elevator in​ Brownfield, Texas, where he has lived for most of his 62 years. The rains during the spring have been the best in a​ decade, and Mr. Hale is expecting a bumper wheat crop. This has prompted him to rethink his current financing sources. He now believes he will need an additional $220,000 for the​ 3-month period ending with the close of the harvest season. After meeting with his​ banker, Mr. Hale is puzzling over what the additional financing will actually cost. The banker quoted him a rate of 2 percent over prime​ (which is currently 8 percent) and also requested that the firm increase its current bank balance of $4,000 up to 22 percent of the loan.

a. If interest and principal are all repaid at the end of the​ 3-month loan​ term, what is the annual percentage rate on the loan offer made by Mr.​ Hale's bank?

b. If the bank were to offer to lower the rate to prime if interest is​ discounted, should Mr. Hale accept this​ alternative? Note​: Assume a​ 30-day month and​ 360-day year.

Explain financial strategies that you would advise a mature company to adopt

The Optical Scam Company has forecast a sales growth rate of 20 percent for next year. Current assets, fixed assets, and short-term debt are proportional to sales. The current financial statements are shown here:
  

  
a. Calculate the external funds needed for next year using the equation from the chapter. (Do not round intermediate calculations.)
  
External financing needed           $  
  
b-1. Prepare the firm’s pro forma balance sheet for next year. (Do not round intermediate calculations.)
   

b-2. Calculate the external funds needed. (Do not round intermediate calculations.)
  
External financing needed           $

c. Calculate the sustainable growth rate for the company based on the current financial statements. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
  
Sustainable growth rate             %

How's a bond's duration determined? How can a bond's duration be useful in managing a bond portfolio?

What are the various features of a typical corporate bond?

Moon Software Inc. is planning to issue a 10-year, noncallable bonds to raise a total of $3 million. The bond is with a 10-year maturity and a $1000 par value. The bond has a coupon rate of 6.25% and is compounded annually.

In addition, following information is collected:

1) A share of 5 year 4.25% coupon Treasury note is sold at $1028.58.

2) A share of 10 year 4.25% coupon Treasury note is sold at $1022.1.

3) Moon software Inc. has an outstanding 5-year noncallable bond, with a coupon rate of 10%, compounded semi-annually. The bond is valued at par.

Q: How many 10-year bonds must the firm issue to raise $3,00,000? Assume Moon's default risk remains unchanged, and round your final answer up to a whole number of bonds.

The focus of the last discussion assignment was Boeing Inc. and how some of the company's financial ratios may be affected by the 737 MAX disasters. Now direct the discussion to the company's stock valuation and how it is being affected. In your discussion (in one or two paragraphs) include how the events affect each of the three variables in general stock valuation models: Dividends, growth of the dividends and earnings, and the required return on the stock.

For reference, this was the last discussion prompt:

The Boeing Company is under heavy investigation into the disastrous 737 Max events. The company is part of the Aerospace and Defense Industry.

Currently it appears that some key financial ratios are very close to industry norms or averages.

Current Ratio 1.03 times; Return on Assets 2.69%; Long-term Debt Ratio 17%.

As learned in Ch 3, Return on Assets (ROA) reflects both profit margin and the company's operational efficiency.

Anthony and Michelle Constantino just got married and received $20,000 in cash gifts for their wedding. How much will they have on their​ twenty-fifth anniversary if they place half of this money in a​ fixed-rate investment earning 10 percent compounded​ annually? Would the future value be larger or smaller if the compounding period was 6​ months? How much more or less would they have earned with this shorter compounding​ period?

Multiple Versus Single Overhead Rates, Activity Drivers

Deoro Company has identified the following overhead activities, costs, and activity drivers for the coming year:

Deoro produces two models of dishwashers with the following expected prime costs and activity demands:

The company's normal activity is 8,300 direct labor hours.

Required:

1. Determine the unit cost for each model using direct labor hours to apply overhead. Round intermediate calculations and final answers to nearest cent.

2. Determine the unit cost for each model using the four activity drivers. Round your answers to nearest cent.

3. Which method produces the more accurate cost assignment?

Emerson Electrical Engineering Inc. is issuing new 20-year bonds that have warrants attached. If not for the attached warrants, the bond would carry an 11% interest rate. However, with the warrants attached the bonds will pay a 9% annual coupon. There are 25 warrants attached to each bond, which have a par value of $1000. The exercise price of the warrants is $25 and the expected stock price 10years from now (when the warrants may be exercised) is $50.77.

a) What is the investor's expected overall pre-tax rate of return for this bond-with-warrants issue?

b) The CEO of Emerson is wondering the possibility of replacing the bonds with warrants by convertible bonds. As the CFO for the company, please state your suggestions and explain.

3..

1,

Which of the following statements is true?

Select one:

a. It is possible to make conclusions about the value of stock options without making any assumption about the volatility of stock prices.

b. The put-call parity also hold for American options

c. The value of a call generally increases as current stock price, the time to expiration, the volatility and the risk-free interest rate decrease.

d. The value of a put generally decreases as current stock price, the time to expiration, the volatility and the risk-free interest rate decrease.

2.

Which of the following describes a long position in an option?

Select one:

a. A position that has been held for a long time

b. A position where an option has been purchased

c. A position where there is more than five years to maturity

d. A position where there is more than five years to maturity

3.

Fill in the blank in the following statement:

“If an option price is _____ the upper bound or below the lower bound, there are profitable opportunities for arbitrageurs.”

Select one:

a. equal to

b. below

c. above

d. None of those above

4.

Fill the blanks in the following sentence:

“Put–call parity is a relationship between the _____, c, of a European call option on a stock and the price, p, of a European put option on a stock.”

Select one:

a. bid

b. offer

c. price

d. volume

5.

In which of the following cases is an asset NOT considered constructively sold?

Select one:

a. The owner shorts a futures contract on the stock

b. The owner shorts a forward contract on the asset

c. The owner buys an in-the-money put option on the asset

d. The owner shorts the asset

6.

Which of the following statements is false?

Select one:

a. The risk-free interest rate does not heavily affect the price of an option.

b. Stock prices tend to increase (decrease) when interest rates fall (rise).

c. The value of a call option is negatively related to the size of any anticipated dividends.

d. Stock prices tend to increase (decrease) when interest rates rise (fall).

7.

Which of the following describes a short position in an option?

Select one:

a. A position in an option lasting less than three months

b. A position in an option lasting less than one month

c. A position where an option has been sold

d. A position in an option lasting less than six months

8.

Fill in the blank in the following text:

"If interest rates in the economy increase, the expected return required by investors from the stock market is likely to ______. "

Select one:

a. stay the same

b. balance

c. decrease

d. increase

9.

A trader buys a call and sells a put with the same strike price and maturity date. What is the position equivalent to?

Select one:

a. a long forward

b. a short forward

c. buying the asset

d. None of the above answers

All else equal, firm A has a higher tax rate than firm B. As a result, which firm has a lower WACC?