NOTE*** answer is not 91309.2 or 109154.41 or 110898.7

How does change in a corporate bond rating change investor’s required rate of return?

What actions could the company take to receive a rating upgrade?

Uncle Fred recently died and left $305,000 to his 50-year-old favorite niece. She immediately spent $90,000 on a town home but decided to invest the balance for her retirement at age 65. What rate of return must she earn on her investment over the next 15 years to permit her to withdraw $70,000 at the end of each year through age 80 if her funds earn 8 percent annually during retirement? Round your answer to the nearest whole number.
  

Computech Corporation is expanding rapidly and currently needs to retain all of its earnings; hence, it does not pay dividends. However, investors expect Computech to begin paying dividends, beginning with a dividend of $0.50 coming 3 years from today. The dividend should grow rapidly - at a rate of 35% per year - during Years 4 and 5; but after Year 5, growth should be a constant 7% per year. If the required return on Computech is 13%, what is the value of the stock today? Round your answer to the nearest cent. Do not round your intermediate calculations. Show on a timeline and the formula to discount each PV.

We assume that the company you selected is considering a new project. The project has 8 years’ life. This project requires initial investment of $380 million to purchase equipment, and $30 million for shipping & installation fee. The fixed assets fall in the 7-year MACRS class. The salvage value of the fixed assets is 10.5% of the purchase price (including the shipping & installation fee). The number of units of the new product expected to be sold in the first year is 1,500,000 and the expected annual growth rate is 5.5%. The sales price is $255 per unit and the variable cost is $190 per unit in the first year, but they should be adjusted accordingly based on the estimated annualized inflation rate of 2.2%. The required net operating working capital (NOWC) is 9.5% of sales. Use the corporate tax rate obtained in Step (4) for the project. The project is assumed to have the same risk as the corporation, so you should use the WACC you obtained from prior steps as the discount rate. Note: you may revise the partial model in the file Ch11 P18 Build a Model.xls on the website of the textbook (also posted in this final project learning module in Blackboard) for capital budgeting analysis, but you are NOT required to strictly follow the partial model. Actually, you are encouraged to build a better model by yourself. Draw a time line of the cash flows. WACC = 7.20% Corporate Tax Rate = 18.30%

Peter purchased a 10-year corporate bond with an 8% annual coupon and the yield-to-maturity (YTM) was 10% three years ago. Today, Peter just received the third coupon payment. Due to a financial emergency, Peter is forced to sell the bond today at a price of $1,100.

(a) Determine the annual rate of return (APR) Peter can earn if he held the bond to maturity.

(b) At what price should Peter buy the bond? [Round your final answer to 2 d.p.]

(c) What is Peter’s rate of return after selling his investment? [Hint: You have to consider all the cash flow Peter received and perform a trial-and-error estimation in the calculation]

(d) As compared with your answer computed in part (c), did Peter earn the return of 10% (i.e. YTM of the bond when he purchased) in this investment? Why or why not?

New South Wales Treasury has issued $1,000 face value, 3 - y e a r bonds that pay semi-annual
coupons at a rate of 10 per cent and 4-year bonds that pay semi-annual coupons at a rate of 16 per
cent. The market interest rates decreased sharply just after the issue and the current market rate for
similar bonds is 9.2 per cent.
a. What would be the bond’s current market values (prices)?
b. Calculate the duration for the bonds.
c. If the market condition is expected to be volatile and if you are a risk-averse investor,
what bond should you include in your portfolio?

Given the financial statements for Jones Corporation and Smith Corporation: JONES CORPORATION Current Assets Liabilities Cash $ 127,600 Accounts payable $ 119,000 Accounts receivable 87,100 Bonds payable (long term) 80,100 Inventory 54,300 Long-Term Assets Stockholders' Equity Gross fixed assets $ 594,000 Common stock $ 150,000 Less: Accumulated depreciation 155,700 Paid-in capital 70,000 Net fixed assets* 438,300 Retained earnings 288,200 Total assets $ 707,300 Total liabilities and equity $ 707,300 Sales (on credit) $ 1,835,000 Cost of goods sold 829,000 Gross profit $ 1,006,000 Selling and administrative expense† 293,000 Depreciation expense 59,600 Operating profit $ 653,400 Interest expense 10,000 Earnings before taxes $ 643,400 Tax expense 95,900 Net income $ 547,500 *Use net fixed assets in computing fixed asset turnover. †Includes $16,100 in lease payments. SMITH CORPORATION Current Assets Liabilities Cash $ 37,300 Accounts payable $ 76,500 Marketable securities 16,100 Bonds payable (long term) 237,000 Accounts receivable 74,700 Inventory 83,100 Long-Term Assets Stockholders' Equity Gross fixed assets $ 532,000 Common stock $ 75,000 Less: Accumulated depreciation 257,000 Paid-in capital 30,000 Net fixed assets* 275,000 Retained earnings 67,700 Total assets $ 486,200 Total liabilities and equity $ 486,200 *Use net fixed assets in computing fixed asset turnover. SMITH CORPORATION Sales (on credit) $ 1,090,000 Cost of goods sold 649,000 Gross profit $ 441,000 Selling and administrative expense† 246,000 Depreciation expense 58,100 Operating profit $ 136,900 Interest expense 24,400 Earnings before taxes $ 112,500 Tax expense 47,000 Net income $ 65,500 †Includes $16,100 in lease payments. a. Compute the following ratios. (Use a 360-day year. Do not round intermediate calculations. Input your profit margin, return on assets, return on equity, and debt to total assets answers as a percent rounded to 2 decimal places. Round all other answers to 2 decimal places.)

Jaffa Company prepared its annual financial statements dated December 31 of the current year. The company applies the FIFO inventory costing method; however, the company neglected to apply lower of cost or net realizable value to the ending inventory. The preliminary current year income statement follows:

Assume that you have been asked to restate the current year financial statements to incorporate lower of cost or NRV. You have developed the following data relating to the current year ending inventory:

A company's bond ratings might in concept be similar to your own personal credit ratings. Use an example of how someone's personal credit rating might affect their financial life -- and then translate that to how a bond rating might affect a company's financial choices. (at least 200 words and no copy or plagiarism)

When many people hear the word discrimination, they immediately think of race or gender discrimination which is illegal in the USA. Price discrimination, however, is legal and has nothing to do with race or gender. By definition: Charging different people different prices is legal as long as it does not use other forms of discrimination as the basis of the pricing model. Please note that prices must be made available for all to see and no two individuals making a purchase at the same time and same place are charged different prices unless qualifying criteria are met.

1. Describe a business that uses price discrimination, the pricing model, and how it is not considered illegal (meaning how it is legal to do).
2. Are there situations in which price discrimination is unfair and should be considered illegal (remember to not confuse the word discrimination with price discrimination.
3. Lastly, evaluate the profitability of using different prices for different people. That would mean that some people are paying more, while others are paying less. This would suggest less profits, so why not just charge everyone the same high price??? Explain your understanding of how price discrimination works to maximize profits for the business.

Delia Landscaping is considering a new 4-year project. The necessary fixed assets will cost $183,000 and be depreciated on a 3-year MACRS and have no salvage value. The MACRS percentages each year are 33.33 percent, 44.45 percent, 14.81 percent, and 7.41 percent, respectively. The project will have annual sales of $120,000, variable costs of $31,900, and fixed costs of $12,550. The project will also require net working capital of $3,150 that will be returned at the end of the project. The company has a tax rate of 35 percent and the project's required return is 15 percent. What is the net present value of this project?

The current risk-free rate is 2 percent and the market risk premium is 4 percent. You are trying to value ABC company and it has an equity beta of 0.8. The company earned $3.50 per share in the year that just ended. You expect the company's earnings to grow 4 percent per year. The company has an ROE of 13 percent.

a. What is the value of the stock? Do not round intermediate calculations. Round your answer to the nearest cent.