1. An increase in the share price may be the result of the information problem when...

2. The value of the firm is best measured by...

3. Which of the following is not a potential problem associated with the formation of industrial groups in Japan and Germany?

Boeing Corporation has just issued a callable​ (at par)​ three-year,

5.3 %

coupon bond with​ semi-annual coupon payments. The bond can be called at par in two years or anytime thereafter on a coupon payment date. It has a price of

$ 98.58

a. What is the​ bond's yield to​ maturity?

b. What is its yield to​ call?

c. What is its yield to​ worst?

9) Rohan used a fixed installment loan from his bank to buy new living room furniture. He borrowed $9250 and has 48 monthly payments of $230.19 each. a. Find the APR of the loan. b. Instead of making his 18th payment, Rohan decides to pay the remaining balance on the loan. How much interest will Rohan save?

Tim has preferences over consumption in period 1 and 2 of the form . The price of consumption is $1 in both periods. He has $10,000 in the bank now and is trying to decide between two different investment opportunities, A and B.

A: invest $4,000 in period 1 and receive $8,000 in period 2.

B: invest $2,000 in period 1 and receive $5,000 in period 2.

If Tim can borrow and save at a rate of interest of 50 percent, which investment opportunity will he choose? (Assume that Tim cannot invest more than $4000 if he chooses A, or $2000 if he chooses B.) Show your analysis

Given your answer in (a), how much will he consume in each period?

Given your answer in (a), how much will he consume in each period if now his saving interest rate is 20% and the borrowing rate is still 50%? Show your analysis.

As a result of improvements in product engineering, United Automation is able to sell one of its two milling machines. Both machines perform the same function but differ in age. The newer machine could be sold today for $56,000. Its operating costs are $20,800 a year, but in five years the machine will require a $19,600 overhaul. Thereafter operating costs will be $30,400 until the machine is finally sold in year 10 for $5,600.

The older machine could be sold today for $25,400. If it is kept, it will need an immediate $22,000 overhaul. Thereafter operating costs will be $31,900 a year until the machine is finally sold in year 5 for $5,600.   

Both machines are fully depreciated for tax purposes. The company pays tax at 35%. Cash flows have been forecasted in real terms. The real cost of capital is 8%.

a. Calculate the equivalent annual costs for selling the new machine and for selling the old machine. (Do not round intermediate calculations. Enter your answers as a positive value rounded to 2 decimal places.)

Go to the local library or use the Internet to research how large firms, especially corporations, are rewarding employees who have entrepreneurial skills.Pick a company and answer the following questions: a. Why is an entrepreneurial attitude important in that company today? b. What makes an entrepreneurial employee different from other employees? c. How are these employees being rewarded, and are the rewards worth the effort? Write a report that summarizes your findings.

You hold a portfolio of US Treasuries with a roughly even split between 1 year, 5 year and 10-year bonds (these are the years to maturity as of now). Assume that all US Treasury yields would have a similar outlook (obviously different yields, but the same trends for 1, 5 and 10-year bonds). Further, assume that your thoughts were in line with most of the market, that is, bond yields would continue to increase through all of 2019.

1)     Back in June of 2019, under the assumptions above, which Treasuries would you sell first? Your 1, 5 or 10-year bonds and why – I want to see your thinking on maturity and price effects related to interest rate changes.

2)   Explain why changes in bond yield (required returns) and bond prices are inversely related.

3)     Discuss how price risk may differ for investors that intend to hold their bills/bonds to maturity vs. those that are more likely to churn or turn over their bond portfolios. This is not a big “investment class” discussion, this is about the basics that you should understand from the course material. As a hint, think about holding period return and yield to maturity as well as the value of a bond when you sell it vs. the value at maturity.

What do the words “term”, “decreasing” or “declining term”, and “whole life” mean with respect to life insurance?

Marsha Jones has bought a used Mercedes horse transporter for her Connecticut estate. It cost $41,000. The object is to save on horse transporter rentals.

Marsha had been renting a transporter every other week for $206 per week plus $1.30 per mile. Most of the trips are 90 miles in total. Marsha usually gives the driver a $45 tip. With the new transporter she will only have to pay for diesel fuel and maintenance, at about $.51 per mile. Insurance costs for Marsha’s transporter are $1,500 per year.

The transporter will probably be worth $21,000 (in real terms) after eight years, when Marsha’s horse Nike will be ready to retire. Assume a nominal discount rate of 8% and a forecasted inflation rate of 3%. Marsha’s transporter is a personal outlay, not a business or financial investment, so taxes can be ignored. Hint: All numbers given in the questions are in real terms. Assume CF at end of year, for simplicity.

Calculate the NPV of the investment. (Do not round intermediate calculations. Round your answer to the nearest whole dollar amount.)

A project requires an initial investment of $100,000 and is expected to produce a cash inflow before tax of $27,300 per year for five years. Company A has substantial accumulated tax losses and is unlikely to pay taxes in the foreseeable future. Company B pays corporate taxes at a rate of 40% and can depreciate the investment for tax purposes using the five-year MACRS tax depreciation schedule. Suppose the opportunity cost of capital is 10%. Ignore inflation.

a. Calculate project NPV for each company. (Negative answers should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to the nearest whole dollar amount.)

b-1. What is the IRR of the after-tax cash flows for each company? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.)

b-2. What does comparison of the IRRs suggest is the effective corporate tax rate? (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place.)

Effective tax rate             %

Stuart Electronics is considering investing in manufacturing equipment expected to cost $350,000. The equipment has an estimated useful life of four years and a salvage value of $ 22,000. It is expected to produce incremental cash revenues of $175,000 per year. Stuart has an effective income tax rate of 30 percent and a desired rate of return of 12 percent. (PV of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided.)

Required

1. Determine the net present value and the present value index of the investment, assuming that Stuart uses straight-line depreciation for financial and income tax reporting.

2. Determine the net present value and the present value index of the investment, assuming that Stuart uses double-declining-balance depreciation for financial and income tax reporting.

4. Determine the payback period and unadjusted rate of return (use average investment), assuming that Stuart uses straight-line depreciation.

5. Determine the payback period and unadjusted rate of return (use average investment), assuming that Stuart uses double-declining-balance depreciation. (Note: Use average annual cash flow when computing the payback period and average annual income when determining the unadjusted rate of return.)

Complete this question by entering your answers in the tabs below.

• Req A and B
• Req D and E

Determine the net present value and the present value index of the investment, assuming that Harper uses straight-line depreciation and double-declining-balance for financial and income tax reporting. (Round your answers for "Net present value" to the nearest whole dollar amount and your answers for "Present value index" to 2 decimal places.)

Determine the payback period and unadjusted rate of return (use average investment), assuming that Harper uses straight-line depreciation and double-declining-balance depreciation. (Note: Use average annual cash flow when computing the payback period and average annual income when determining the unadjusted rate of return.) (Round your answers to 2 decimal places.)

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You took out a loan to buy a new car. The monthly interest rate on the loan is 1%. You have to pay $270 every month for 60 months.

Attempt 1/5 for 8 pts. Part 1 What is the present value of the cash flows if it's an ordinary annuity?

Attempt 1/5 for 8 pts. Part 2 What is the future value of the cash flows if it's an ordinary annuity?

Attempt 1/5 for 10 pts. Part 3 What is the present value of the cash flows if it's an annuity due?

Attempt 1/5 for 8 pts. Part 4 What is the future value of the cash flows if it's an annuity due?

You just turned 21 years old and want to retire when you turn 65. You plan to put $4,700 every year into a ROTH IRA, a retirement account from which you can withdraw money after retirement without having to pay any taxes. You expect to earn a return of 6% on your investments every year.

How much money can you expect to have at age 65 if you make your first deposit now and your last one on the day you turn 64?

You took out some student loans in college and now owe $12,000. You consolidated the loans into one amortizing loan, which has an annual interest rate of 4% (APR).

If you make monthly payments of $200, how many months will it take to pay off the loan? Fractional values are acceptable.