Quad Enterprises is considering a new 3-year expansion project that requires an initial fixed asset investment of $1.836 million. The fixed asset will be depreciated straight-line to zero over its 3-year tax life, after which time it will have a market value of $142,800. The project requires an initial investment in net working capital of $204,000. The project is estimated to generate $1,632,000 in annual sales, with costs of $652,800.

The tax rate is 21 percent and the required return on the project is 11 percent.

What is the project's Year 0 net cash flow? What is the project's Year 1 net cash flow? What is the project's Year 2 net cash flow?

What is the project's Year 3 net cash flow? What is the NPV?

You want to buy a $255,000 home. You plan to pay 15% as a down payment, and take out a 30 year loan for the rest.

a) How much is the loan amount going to be? $

b) What will your monthly payments be if the interest rate is 5%? $

c) What will your monthly payments be if the interest rate is 6%? $

2. Davis Inc.'s bonds currently sell for $800 and have a par value of $1,000. They pay a $100 annual coupon and have a 20-year maturity, but they can be called in 5 years at $1,200. What is their Capital Gain Yield (CGY)?

3. A 10-year, 5% semiannual coupon bond selling for $1,135.90 can be called in 4 years for $1,200 (hint: par value is $1,000). What is its yield to maturity (YTM)?

4. A 10-year, 5% semiannual coupon bond selling for $1,135.90 can be called in 4 years for $1,200 (hint: par value is $1,000). What s its current yield (CY)?

5. A 10-year, 10% semiannual coupon bond selling for $1,135.90 can be called in 4 years for $1,200 (hint: par value is $1,000). What is its yield to call (YTC)?

6. Davis Inc.'s bonds currently sell for $800 and have a par value of $1,000. They pay a $100 annual coupon and have a 20-year maturity, but they can be called in 5 years at $1,200. What is their yield to maturity (YTM)?

7. Davis Inc.'s bonds currently sell for $800 and have a par value of $1,000. They pay a $60 annual coupon and have a 20-year maturity, but they can be called in 5 years at $1,200. What is their Expected Current Yield (CY)?

8. Davis Inc.'s bonds currently sell for $800 and have a par value of $1,000. They pay a $60 annual coupon and have a 20-year maturity, but they can be called in 5 years at $1,200. What is their yield to Call (YTC)?

9. Kimberly’ Motors has a beta of 1.40, the T-bill rate is 3.00%, and the Tbond rate is 7.0%. The annual return on the stock market during the past 3 years was 15.00%, but investors expect the annual future stock market return to be 10.00%. Based on the SML, what is the firm's required return?

10. Suppose the interest rate (return rate) on a 1-year T-bond is 3.0% and that on a 2-year T-bond is 6.0%. Assuming the pure expectations theory is correct, what is the market's forecast for 1-year rates 1 year from now?

11. Stacker’s Corporation's bonds have a 10-year maturity, a 10.00% semiannual coupon, and a par value of $1,000. The going interest rate (rd) is 2.00%, based on semiannual compounding. What is the bond’s price?

12. If the pure expectations theory holds, what does the market expect will be the interest rate (expected return rate) on one-year securities, three years from now? (1year maturity yield is 6.0%; 2year maturity yield is 6.1%; 3year maturity yield is 6.3%; 4year maturity yield is 6.3 %; 5year maturity yield is 6.3%)? (Hints: Draw the timeline and then calculate the interest rate (expected return rate) on two-year securities, two years from now.)

Wendy and Wayne are evaluating a project that requires an initial investment of $867,000 in fixed assets. The project will last for eight years, and the assets have no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 94,000 units per year. Price per unit is $38, variable cost per unit is $27, and fixed costs are $882,606 per year. The tax rate is 31 percent, and the required annual return on this project is 14 percent. The projections given for price, quantity, variable costs, and fixed costs are all accurate to within +/- 16 percent. Required:

(a) Calculate the best-case NPV. (Do not round your intermediate calculations.)

(b) Calculate the worst-case NPV. (Do not round your intermediate calculations.)

You invest $50,000 now and receive $10,000 per year for 15 years starting at the end of the first year. What is the discounted payback period? Use i = 9% annual rate compounded annually. Give the discounted payback period between two consecutive integers.

Explain what types of financial and management goals Medi-Supply might have as the company moves forward to look for investors. (75–150 words, or 1–2 paragraphs)

If 1) the expected return for Litchfield Design stock is 10.66 percent; 2) the dividend is expected to be 2.99 dollars in 2 year(s), 4.4 dollars in 4 years, and 8.08 dollars in 8 years; and 3) after the dividend is paid in 8 years, the dividend is expected to grow by 3.04 percent per year forever, then what is the current price of the stock?  If no expected dividend is mentioned for a given year, assume the expected dividend is $0 for that year.

One year ago, you bought a put option on 500,000 euros with an expiration date of one year. You paid a premium on the put option of $.03 per unit. The exercise price was $1.30. Assume that one year ago, the spot rate of the euro was $1.29, the one-year forward rate exhibited a discount of 3%, and the one-year futures price was the same as the one-year forward rate. From one year ago to today, the euro depreciated against the dollar by 2 percent. Today the put option will be exercised (if it is feasible for the buyer to do so).

a. Determine the total dollar amount of your profit or loss from your position in the put option.

b.Now assume that instead of taking a position in the put option one year ago, you sold a futures contract on 500,000 euros with a settlement date of one year. Determine the total dollar amount of your profit or loss.

14 of 16 CVC programs claimed that their primary goad was strategic, but half used financial measures such as cash-on-cash returns or IRR to gauge the success of an investment. Is the generation of “cash” a strategic goal for most strategic investors? Please answer in 2-3 paragraphs

TIPS or Treasury Inflation Protection Securities incur what kind of risk(s): default risk, interest rate risk, call risk, purchasing power risk, reinvestment risk, or liquidity risk.

A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long-term government and corporate bond fund, and the third is a T-bill money market fund that yields a sure rate of 5.6%. The probability distributions of the risky funds are:

Expected Return Standard Deviation

Stock fund (S) 17% 46%

Bond fund (B) 8% 40%

The correlation between the fund returns is .0600. What is the reward-to-volatility ratio of the best feasible CAL? (Do not round intermediate calculations. Round your answer to 4 decimal places.) Reward-to-volatility ratio

Oil Well Supply offers a 7 percent coupon bond with semiannual payments and a yield to maturity of 7.73 percent. The bonds mature in 9 years. What is the market price per bond if the face value is $1,000?

$1,401.26

$1,016.95

$1,401.86

$953.88

$953.28

Discussion 1 – due 23 February 2020, 11:55 PM ECT (5% of coursework marks)

Provide Sue with financial advice on which option has the potential to yield the highest monetary value. Support your rational with calculations using time value of money and comment on the risk return relationship for each option, assume interest rate on savings is 4% and is compounded semi-annually.

Sue James is a 55-year old accountant who works at Ernst and Young (EY) who is about to retire. She has the following decision to make:

Option A – Select a lump sum gratuity payment of $120,000 with a reduced pension of $1,750 per month.

Option B – Select a monthly pension of $3,300 with no lump sum gratuity payment.

In addition, Sue has a loan of $72,000 with loan payments of $1,200 per month for the next five years.

word limit 200 words

Instruction:   The table consists of information about 2 competing investments.                  
                      
Economy    Probability   Project A           Project B  
       Profit     Expected Value       Profit     Expected Value
Weak   15.0%   $10.00           -$25.00  
OK   55.0%   $30.00           $0.00  
Good    20.0%   $50.00           $100.00  
Excellent   10.0%   $70.00           $200.00  
   100%                  
                      
Part 1 - calculate the expected value for each project.           3 points per answer          
                      
part 2 - which do you select?           Why?          
                      
                      

________ 16.   According to the Rule of 72, it will take _____ years to double your money at a 6.4 percent rate of interest.

                         a. 11.25 years b. 11.33 years                         c. 11.67 years                   d. 12.00 years

________ 17.   Your current annual salary is $97,400. Your first job paid $22,500. How many years have you been

                         employed if your average annual salary increase has been 4.2 percent?

                         a. 26.87 years b. 31.15 years                         c. 32.01 years                   d. 35.62 years

________ 18.   Which one of the following statements is correct, all else held constant?

                         a.    The future value will decrease if the interest rate is increased.

                         b. The present value is directly related to the interest rate.

                         c. An increase in the interest rate will increase the time period.

                         d. The future value and the present value are directly related.

________ 19.   Ten years ago, Zenia had a population of 4.6 million residents. Today, there are 6.3 million residents of

                         Zenia. What is the annual rate of population growth?

                         a. 2.68 percent               b. 2.94 percent                        c. 3.19 percent                  d. 4.27 percent

________ 20.   A farmer currently produces 45,000 bushels of corn a year. He can increase his harvest by an average rate of

                         3 percent annually. How long will it be until the farmer can produce 50,000 bushels of corn each year?

                         a. 3.07 years b. 3.56 years                           c. 3.80 years                     d. 4.14 years