Find the duration of a bond with settlement date June 15, 2018, and maturity date December 23, 2027. The coupon rate of the bond is 9%, and the bond pays coupons semiannually. The bond is selling at a yield to maturity of 10%. (Do not round intermediate calculations. Round your answers to 4 decimal places.)

Macaulay duration:
Modified duration:

Pension funds pay lifetime annuities to recipients. If a firm remains in business indefinitely, the pension obligation will resemble a perpetuity. Suppose, therefore, that you are managing a pension fund with obligations to make perpetual payments of $3.0 million per year to beneficiaries. The yield to maturity on all bonds is 20%. a. If the duration of 5-year maturity bonds with coupon rates of 16% (paid annually) is 3.7 years and the duration of 20-year maturity bonds with coupon rates of 7% (paid annually) is 6.5 years, how much of each of these coupon bonds (in market value) will you want to hold to both fully fund and immunize your obligation? (Do not round intermediate calculations. Enter your answers in millions rounded to 1 decimal place.) b. What will be the par value of your holdings in the 20-year coupon bond? (Enter your answer in dollars not in millions. Do not round intermediate calculations. Round your answer to the nearest dollar amount.)

Question: Howell Corporation produces an executive jet for which it currently manufactures a fuel valve; the cost of the valve is indicated below: Cost per Unit Variable costs Direct material $960 Direct labor 600 Variable overhead 300 Fixed costs Depreciation of equipment 500 Depreciation of building 225 Supervisory salaries 300 The company has an offer from Duvall Valves to produce the part for $2, 000 per unit and supply 1,000 valves (the number needed in the coming year). If the company accepts this offer and shuts down production of valves, production workers and supervisors will be reassigned to other areas. The equipment cannot be used elsewhere in the company, and it has no market value. However, the space occupied by the production of the valve can be used by another production group that is currently leasing space for $55,000 per year. What is the incremental savings of buying the valves? (the answer should be stated in a per unit format and is a positive number)

"Corporate Liquidations, Taxable Acquisition Transactions, and Nontaxable Reorganizations"

• IRC Section 338 allows a deemed sale election generating immediate taxation to the target corporation and a stepped-up or stepped-down basis to the price paid by the acquiring corporation for the target corporation stock plus liabilities on the deemed sale. Examine at least one (1) benefit of a Section IRC 338 liquidation election for a target corporation. Create a scenario that would demonstrate a favorable IRC Section 338 liquidation election for a target corporation.

13. Which of the following statements is INCORRECT about trading on margin A. It is a leveraged equity investment. B. Stocks purchased on margin are registered in street name. C. It increases payoff both on the upside and downside. D. In general, a limit-buy order may be placed to limit potential losses.

17. Consider the following short sale example: an investor borrows 100 shares of a stock from the broker, put down 50% as the initial margin, and sells the stock at $50/share in the market. If the maintenance margin is 30%, how much can the stock price rise before the investor gets a margin call?

      A. 56.79

      B. 57.69

      C. 59.69

      D. 58.79

18. Regarding the previous question, suppose the stock price later goes up from $50/share to $75/share, put a ____________may limit the potential loss for the investor?

      A. limit sell order at $60/share

      B. limit buy order at $60/share

      C. stop loss order at $60/share

      D. stop buy order at $60/share

Consider two companies: United States steel (X) and Facebook (FB). Look at the profiles (financial statements for 2016) of each on yahoo finance and discuss the followings (you need to calculate these values yourself and show details of your calculations): How many outstanding shares the company has? What is the market value of the company? What is the book value of the company? What is the beta for the company? How do you find the risk free rate? (consider the market risk premium to be 8%) Using CAPM calculate the expected return on the equity for the company. (To get the required rate of return on debt, divide the interest expense by total debt) (To get the total debt, add the short term debt to long term debt) What is the Weighted average cost of capital (WACC) for the company? What is the leverage (total debt/equity ratio) for the company?

1. Given S = P(1+rt), solve for t.
2. What is the meaning of the y-intercept in a cost function graph?    
3. What is the purpose of the consumer price index?
4. If a company is operating beyond the breakeven point, then does each additional dollar of revenue add a dollar to the net income?   
5. Is the break-even volume, in units, a) the ratio of fixed cost per unit contribution margin or b) the ratio of selling price per unit contribution margin?  
6. In ordinary dating, are both the credit and discount periods measured with Day 1 being the invoice date orthe day after?  
7. Is the contribution rate the difference between the selling price and the variable cost per unit?   
8. Is markup the difference between selling price and cost of buying plus expenses, or the sum of expenses and profit?
9. Is the face value of a Treasury bill the present value or the future value?
10. If an investment loses 30% in one year and gains 30% the following year, is there a net change in value?

Assume that Atlas Sporting Goods Inc. has $850,000 in assets. If it goes with a low-liquidity plan for the assets, it can earn a return of 16 percent, but with a high-liquidity plan the return will be 13 percent. If the firm goes with a short-term financing plan, the financing costs on the $850,000 will be 10 percent, and with a long-term financing plan, the financing costs on the $850,000 will be 12 percent.

a. Compute the anticipated return after financing costs with the most aggressive asset-financing mix.

b. Compute the anticipated return after financing costs with the most conservative asset-financing mix.

c. Compute the anticipated return after financing costs with the two moderate approaches to the asset-financing mix.

d. If the firm used the most aggressive asset-financing mix described in part a and had the anticipated return you computed for part a, what would earnings per share be if the tax rate on the anticipated return was 30 percent and there were 20,000 shares outstanding? (Round your answer to 2 decimal places.)

e-1. Now assume the most conservative asset-financing mix described in part b will be utilized. The tax rate will be 30 percent. Also assume there will only be 5,000 shares outstanding. What will earnings per share be? (Round your answer to 2 decimal places.)

e-2. Would the conservative mix have higher or lower earnings per share than the aggressive mix? Lower Higher

Explain the critical assumptions that underpin the Capital asset pricing model (CAPM).

(500 WORDS)

Risk and Return

Please respond to the following:

• Determine whether stock prices are affected more by long-term or short-term performance. Provide one example of the effect that supports your claim.

Explain the main functions of budgeting with examples from your organization.

(500 WORDS)

Please provide specific Excel functions =NPV(…), =IRR(…), =AVERAGE(…), =YIELD(…) whenever applicable.

Given the following information for Bajor Co.:

Debt: Bajor’s long-term debt capital consists of bonds with 6.250 percent coupon rate (semiannual coupon payments), 9 years time-to-maturity, and current price of 106.61 percent of its par value (i.e., price = 106.61 relative to full amount redemption par of 100).

Preferred stock: Bajor has not issued any preferred stocks.

Common stock (equity):

• Bajor’s equity capital consists of common stocks with the most recent annual dividend of $0.92 per share, and a current stock price of $14 per share.
• According to online data sources, Bajor’s long-term dividend growth (for next 5-Year average, per annum) g = 4.5% per year.
• The “risk-free” Treasury bill return is 3.8%; the market expected return for the stock market on average is 12.3%; and Bajor’s systematic risk (Beta) is 0.71.

Taxes: The applicable federal-plus-state corporate tax rate for Bajor is 25.7 percent.

Capital weight: Bajor’s “Market Cap” amounts to $18.23 billion, and “Total Debt” amounts to $14.44 billion. You can use such data to estimate the capital weights for equity and debt, respectively (We and Wd).

Time constraint: For any investment projects, Bajor are required by her investors to recover its initial cost within no more than 6 years.

Q1: What is Bajor’s pretax cost of debt Rd, cost of equity Re, and WACC, respectively? (Hint: For the best estimate of cost of equity Re, you must apply both CAPM and Dividend Growth Model and then average the two estimates.)  

You want to invest in a project in Greenland. The project has an initial cost of G$776,000 and is expected to produce cash inflows of G$397,000 a year for three years. The project will be worthless after three years. The expected inflation rate in Greenland is 4.2 percent while it is 1.2 percent in the U.S. The applicable interest rate in Greenland is 5.87 percent. The current spot rate is G$1 = US$.12. What is the net present value of this project in U.S. dollars using the foreign currency approach? (Find the NPV in G$, then convert to US$ using the spot rate)

$30,209.87

$38,357.72

$36,428.66

$34,529.20

$32,547.36