You own a bond with the following features: 10 years to maturity, face value of $1000, coupon rate of 4% (annual coupons) and yield to maturity of 4.8%. If you expect the yield to maturity to remain at 4.8%, what do you expect the price of the bond to be in two years?

Calculate the annual cash flows (annuity payments) from a fixed-payment annuity if the present value of the 25-year annuity is $1.9 million and the annuity earns a guaranteed annual return of 13 percent. The payments are to begin at the end of seven years.

Dantzler Corporation is a fast-growing supplier of office products. Analysts project the following free cash flows (FCFs) during the next 3 years, after which FCF is expected to grow at a constant 8% rate. Dantzler's WACC is 13%.

1. What is Dantzler's horizon, or continuing, value? (Hint: Find the value of all free cash flows beyond Year 3 discounted back to Year 3.) Round your answer to two decimal places. Enter your answer in millions. For example, an answer of $13,550,000 should be entered as 13.55.
   $ million
   
2. What is the firm's value today? Round your answer to two decimal places. Enter your answer in millions. For example, an answer of $13,550,000 should be entered as 13.55. Do not round your intermediate calculations.
   $ million
   
3. Suppose Dantzler has $30 million of debt and 20 million shares of stock outstanding. What is your estimate of the current price per share? Round your answer to two decimal places. Write out your answer completely. For example, 0.00025 million should be entered as 250.
   $

A bond offers a coupon rate of 4%, paid annually, and has a maturity of 5 years. The current market yield is 9%. If market conditions remain unchanged, what should be the Capital Gains Yield of the bond?

First five years of a business:

Cost of Capital 8.00%

Initial Investment $(40,000)

Year 1 Cash Flows 8,000

Year 2 Cash Flows 9,200

Year 3 Cash Flows 10,000

Year 4 Cash Flows 12,000

Year 5 Cash Flows 14,500

1. Calculate the net present value (NPV), internal rate of return (IRR) and payback period.

2. Assume you can sell the business in year 5 for 10x’s annual cash flow. Calculate the net present value (NPV) and internal rate of return (IRR).

3. Suppose the cost of capital is 12% instead of 8%.....

4. What are the net present value (NPV) and internal rate of return (IRR) for the initial cash flow numbers with the new cost of capital?

5. Now, assume you can sell the business in year 5 for 10x’s annual earnings. What are the net present value (NPV) and internal rate of return (IRR) with the new cost of capital?

Gateway Communications is considering a project with an initial fixed assets cost of $1.71 million that will be depreciated straight-line to a zero book value over the 10-year life of the project. At the end of the project the equipment will be sold for an estimated $229,000. The project will not change sales but will reduce operating costs by $382,000 per year. The tax rate is 35 percent and the required return is 10.4 percent. The project will require $46,500 in net working capital, which will be recouped when the project ends. What is the project's NPV?

What is the NPV for the project if the company requires a return of 11 percent?

Should the company accept this project?

Fill in the blank: This project has two IRR's namely, ______ percent and _______ percent, in order from smallest to largest.

The Yurdone Corporation wants to set up a private cemetery business. According to the CFO, Barry M. Deep, business is "looking up." As a result, the cemetery project will provide a net cash inflow of $94,000 for the firm during the first year, and the cash flows are projected to grow at a rate of 3 percent per year forever. The project requires an initial investment of $1,470,000.

A)

B) Yes or No: If the company requires a return of 12 percent on such undertakings, should the cemetery business be started?

C) The company is somewhat unsure about the assumption of a growth rate of 3 percent in its cash flows. At what constant growth rate would the company just break even if it still required a return of 12 percent on investment?

A) What is the IRR for each of these projects?

B) Using the IRR decision rule, which project should the company accept?

C) Is this decision necessarily correct?

D) If the required return is 10 percent, what is the NPV for each of these projects?

E) Which project will the company choose if it applies the NPV decision rule?

F) At what discount rate would the company be indifferent between these two projects?

Is profit (the difference between output value and input cost) a good metric for investment capital allocation? What are externalities?

1. What is a trade-off according to Porter?
2. Why are trade-offs important?
3. Why is it essential to make trade-offs?
4. Give examples of trade-offs in the airline industry and Taiwan Semiconductor.
5. What are the trade-offs IKEA made compared to traditional furniture retailers. Talk about product design, product variety, in-store service, delivery and store design, flat packs.