Consider a 30-year mortgage for $347,060 at an annual interest rate of 4.7%. What is the remaining balance after 5 years?

A stock's returns have the following distribution:

Assume the risk-free rate is 2%. Calculate the stock's expected return, standard deviation, coefficient of variation, and Sharpe ratio. Do not round intermediate calculations. Round your answers to two decimal places.

Stock's expected return:   %

Standard deviation:   %

Coefficient of variation:

Sharpe ratio:

IBM is considering a new expansion project and the finance staff has received information summarized below:

- The project require IBM to purchase $1,000,000 of equipment in 2013 (t=0)

- Inventory will increase by $100,000 and accounts payable will rise by $50,000

- The project will last for four years. The company forecasts that they will sell 1,000,000 units in 2014, 2,000,000 units in 2015, 3,000,000 units in 2016, and 4,000,000 units in 2017. Each unit will sell for $3.00

- The fixed cost of producing the product is $2 million each year

- The variable cost of producing each unit is $1.00 each year

- The equipment will be depreciated under the MACRS system using the applicable rates of 33%, 45%, 15%, and 7% respectively

- When the project is completed in 2017 (t=4), the company expects that it will be able to salvage the equipment for $100,000, and it expects that it will fully recover the NWC.

- The estimated tax rate is 40%

- Based on the perceived risk, the project's WACC is estimated to be 12%

What is the total investment amount at the start of the project?

What is the depreciation amount for each year? Create a depreciation schedule

Compute the book values for each year

Compute the after-tax salvage value

Calculate the net income during the project's life for each year and the Operating Cash Flows

Describe how investments in research and development (R & D) can be viewed as an option. Describe the chain of events that occurs for R&D projects, including the points in time at which decisions are made.

You purchase equipment for $100,000 and it costs $10,000 to have it delivered and installed. Based on past information, you believe that you can sell the equipment for $17,000 when you are done with it in 6 years. The company’s marginal tax rate is 40%. What is the depreciation expense each year and the after-tax salvage in year 6 for each of the following situations?

You must evaluate the purchase of a proposed spectrometer for the R&D department. The purchase price of the spectrometer including modifications is $60,000, and the equipment will be fully depreciated at the time of purchase. The equipment would be sold after 3 years for $25,000. The equipment would require a $7,000 increase in net operating working capital (spare parts inventory). The project would have no effect on revenues, but it should save the firm $27,000 per year in before-tax labor costs. The firm's marginal federal-plus-state tax rate is 25%.

1. What is the initial investment outlay for the spectrometer, that is, what is the Year 0 project cash flow? Enter your answer as a positive value. Round your answer to the nearest dollar.
   $  
2. 
   
3. What are the project's annual cash flows in Years 1, 2, and 3? Do not round intermediate calculations. Round your answers to the nearest dollar.
   Year 1: $  
   Year 2: $  
   Year 3: $  
4. 
   
5. If the WACC is 12%, should the spectrometer be purchased?
   -Select-YesNo

The following table shows historical end-of-week adjusted close prices (including dividends) for a stock and the S&P 500.

2. What is the geometric average weekly return for the S&P 500?

3. What is the annualized return for the S&P 500 (EAR)?

4. Calculate the weekly returns. What is standard deviation of weekly returns for the S&P 500?

5. What is the beta of the stock?

Item 8

Item 8

Loaded-Up Fund charges a 12b-1 fee of 1% and maintains an expense ratio of 0.65%. Economy Fund charges a front-end load of 2%, but has no 12b-1 fee and an expense ratio of 0.35%. Assume the rate of return on both funds’ portfolios (before any fees) is 10% per year.


a. How much will an investment of $100 in each fund grow to after 1 year? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

b. How much will an investment of $100 in each fund grow to after 3 years? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

1. Use the following information to work Problems (1) through (4):

You work for a lab that is considering leasing diagnostic equipment. The cost of the equipment is $6,300,000, and it would be depreciated straight-line to zero over four years. The equipment will be completely valueless in four years. You can lease it for $1,875,000 per year for four years.

1. Assume that the tax rate is 35 percent. You can borrow at 8 percent before taxes. Should you lease or buy?
2. What would the lease payment have to be for you to be indifferent about the lease?   
3. Assume that your company does not anticipate paying taxes for the next several years (you can not use the tax shield from leasing payment or asset depreciation; the cost of debt is the same as pretax cost). What are the cash flows from leasing in this case? Should you lease or buy?
4. Rework Problem 1 assuming that the scanner will be depreciated as three-year property under MACRS.

firm is considering renewing its equipment to meet increased demand for its product. The cost of equipment modifications is $ 1.90 million plus $ 100000 in installation costs. The firm will depreciate the equipment modifications under​ MACRS, using a​ 5-year recovery period​. Additional sales revenue from the renewal should amount to $ 1.20 million per​ year, and additional operating expenses and other costs​ (excluding depreciation and​ interest) will amount to 40 % of the additional sales. The firm is subject to a tax rate of 40 %. ​(Note​: Answer the following questions for each of the next 6​ years.) a. What incremental earnings before​ depreciation, interest, and taxes will result from the​ renewal? b. What incremental net operating profits after taxes will result from the​ renewal? c. What incremental operating cash inflows will result from the​ renewal?

Manpower Electric Company has 6 percent convertible bonds outstanding. Each bond has a $1,000 par value. The conversion ratio is 20, the stock price $37, and the bonds mature in 11 years. Use Appendix B and Appendix D as an approximate answer, but calculate your final answer using the formula and financial calculator methods.

a. What is the conversion value of the bond? (Do not round intermediate calculations and round your answer to the nearest whole dollar.)

CONVERSION VALUE ________

b. Assume after one year that the common stock price falls to $30.00. What is the conversion value of the bond? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

CONVERSION VALUE ________

c. Also assume that after one year interest rates go up to 10 percent on similar bonds. There are 10 years left to maturity. What is the pure value of the bond? Use semiannual analysis. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

PURE VALUE OF THE BOND ____________

d. Will the conversion value of the bond (part b) or the pure value of the bond (part c) have a stronger influence on its price in the market?

• Conversion value of the bond

• Pure value of the bond

e. If the bond trades in the market at its pure bond value, what would be the conversion premium (stated as a percentage of the conversion value)? (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)

CONVERSION PREMIUM PERCENTAGE ________%

Your client is 23 years old. She wants to begin saving for retirement, with the first payment to come one year from now. She can save $15,000 per year, and you advise her to invest it in the stock market, which you expect to provide an average return of 11% in the future.

1. If she follows your advice, how much money will she have at 65? Round your answer to the nearest cent.

   $  

2. How much will she have at 70? Round your answer to the nearest cent.

   $  

3. She expects to live for 20 years if she retires at 65 and for 15 years if she retires at 70. If her investments continue to earn the same rate, how much will she be able to withdraw at the end of each year after retirement at each retirement age? Round your answers to the nearest cent.

   Annual withdrawals if she retires at 65: $

   Annual withdrawals if she retires at 70: $