1. You are saving for retirement. Starting this month, you will deposit $600 per month into a stock account that earns 9% interest. In ten years, you will begin depositing an additional $350 per month into a bond account that earns 6% interest. You expect interest rates to shift upwards 1.5% 20 years from now. This means, at that point, each of the accounts listed above will earn interest 1.5% higher than before. How much will you have when you retire if you plan to retire in 37 years?

35. Discuss "Corporate Intelligence" and "Corporate Espionage".

Consider a $12,000 loan with 4 equal annual payments and 10% interest.

a. Calculate the annual payment, n = 4, r = 0.10.

b. Prepare a complete loan payment schedule table for this loan. You need the time period, the beginning principal, payment, interest paid, principal paid, and ending principal in your table.

c. Now assume that the loan is fully amortized over 4 years, however, the interest rate is variable. That is, the bank changes a different rate each year as money market conditions change. Assume the rates turn out to be:

Year 1 ‐ 10%

Year 2 ‐ 12%

Year 3 ‐ 14%

Year 4 ‐ 10%

Compute what each year's interest and principal would be under the above scenario. To do this you will need to amortize the principal left at the beginning of each year over the remaining years of the loan at the new interest rate. This will give you the payment. Then you can calculate the interest paid and the principal paid each year.

Bruno's Lunch counter is expanding and expects operating cash flows of $20,500 a year for 5 years as a result. This expansion requires $54,000 in new fixed assets. These assets will be worthless at the end of the project. In addition, the project requires $4,800 of net working capital throughout the life of the project. What is the net present value of this expansion project at a required rate of return of 13 percent?

Consider the differences between payback period and the accounting rate of return.

Explain why one provides a more accurate analysis of an investment decision than the other.

CONDENCED STATEMENT OF CASH FLOW

FOR THE YEAR ENDED DECEMBER 31 (IN THOUSANDS)  

2011

Cash flows from operating activities  

Cash receipts from operating activities  

$12,000

   Cash payments for operating activites  

10,000

Net cash provided by operating activities   3,000

Cash flows from investing activities  

Purchases of property, plant, and equipment   (500)

Other investing activities  

(130)

Net cash used in investing activities  

(630)

Cash flows from financing activities  

Issuance of common stock  

160

Issuance of debt  

2,179

Reductions of debt  

-2,01

Payment of dividends  

-475

Repurchase of common stock and other items   -645

Net cash provided (used) by financing activities   -792

Increase (decrease) in cash and cash equivalents   1,578

Cash and cash equivalents at beginnign of year   411

Cash and cash equivalents at end of year  

$1,989

Additional information  

2011

Average number of shares (thousands)  

500

Stock price atr year-end  

$60.00

1. Compute the following from the spreadsheet. I need the numerical answer, a brief discussion of what the ratio means and if the company is in a position of strength or weakness (to the best you can without having a company to compare)

Current ratio

Quick Ratio

Debt to Asset

Debt to Equity

ROA (for year 2011)

ROE (for year 2011)

Inventory Turnover

EPS

P/E

A bond with a face value of $1,000 has 10 years until maturity, carries a coupon rate of 8.7%, and sells for $1,130. Interest is paid annually. (Assume a face value of $1,000 and annual coupon payments.)

a. If the bond has a yield to maturity of 9.3% 1 year from now, what will its price be at that time? (Do not round intermediate calculations. Round your answer to nearest whole number.)

b. What will be the rate of return on the bond? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Negative amount should be indicated by a minus sign.)

c. If the inflation rate during the year is 3%, what is the real rate of return on the bond? (Assume annual interest payments.) (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Negative amount should be indicated by a minus sign.)

• Explain why $100 received today is not the same as $100 received next year. What is the meaning of the time value of money.
• What is the purpose of learning the mathematics behind the time value of money?
• What are the factors that affect the overall level of interest rates?

Set up an amortization schedule that amortizes $500,000 with 5 years of cyclical quarterly payments. The annual interest rate is 6%. The payment schedule is: " one-third a normal payment" at the end of quarter 1, "normal payments" at the end of quarters 2 and 3, and "50% of a normal payment" at the end of quarter 4.

please solve in excel and list equations that go in the cells. Thank you :)

Oscar’s Corp. is considering starting a new business involving bicycle production. This new business involves purchases of $8 million of new equipment. This new business is anticipated to generate net income of $1.45 million per year for 6 years. The company uses straight-line depreciation to zero salvage value for tax purposes. Assuming a 28 percent tax rate calculate the project's IRR.

You are considering two different stirring machines for your goat cheese factory. Both meet your performance requirements but differ as tabled below. If you anticipate remaining in business for at least 15 years, and your discount rate is 4%, which machine should you select? Assume no taxes. Machine A Machine B Acquisition cost $40,000 $65,000 Yearly operating cost $10,000 $9,000 Useful Life 3 years 5 years

ABC is considering a leasing arrangement to finance some special manufacturing tools that is needed for production during the next four years. A planned change in the firm’s production technology will make the tool obsolete after 4 years. The firm will depreciate the cost of the tools on a straight-line basis. The firm can borrow $5,000,000, the purchase price, at 12% to buy the tools or make four equal end of the year lease payments of $2,500,000. The firm’s tax rate is 30% and the firm’s before-tax cost of debt is 10%. Annual maintenance costs associated with ownership are estimated at $250,000. Should the firm lease or buy?

The foreign exchange quotes are given below:

Braggart Bank 100.80 yen/$

Thrifty Bank 100.55 yen/$

• If we assume no transaction costs, there is evidently an opportunity for arbitrage here.

• If an arbitrageur started with $10,000, exactly how would she make profits and how much profit would she make?

• As many traders engage in arbitrage what do you expect to see in the above quotes at these two banks?

• If there is a 12.5 basis points transaction fee for each exchange is there still an opportunity for arbitrage?

Duke Corporation is analyzing two machines to determine which one it should purchase. Whichever machine is purchased will be replaced at the end of its useful life. The company requires a 12 percent rate of return and uses straight-line depreciation to a zero book value over the life of the machine. Machine A has a cost of $405,000, annual operating costs of $21,000, and a 3-year life. Machine B costs $276,000, has annual operating costs of $33,000, and a 2-year life. The firm currently pays no taxes. Which machine should be purchased and why?