1. Zayes, LLC. has identified the following cashflows for a four-year project.

Year                          Cashlow

1.    -$79,80
2. 34,000
3. 41,000
4. 28,000
5. 21,000

1. What is the project’s payback period?
2. What is the IRR for this project? If the required return is 11 percent, should the project be accepted based on the IRR decision rule?
3. If the required return is 11 percent, what is the NPV for this project? Should the project be accepted based on the NPV decision rule?

1. Suppose today a one year ZCB is priced at 0.97, a two year ZCB is priced at 0.95 and a three year ZCB is priced at 0.92. What is the implied forward rate for a one year loan starting one year from now? What is the implied forward rate for a one year loan starting two years from now?

2. Suppose the same info as in question 1. Suppose you wanted to lend $1 at the end of year 1 for two years, so that the loan matured at the end of year 3. Describe how you would buy and sell the ZCBs to accomplish this goal, and the amount of money that you would collect when the loan matured.

Please answer question 2

3.

A What was the real rate of return over the past year (from one year ago to today) for a stock if the inflation rate over the past year was 4.57 percent, the risk-free return over the past year was 6.99 percent, the stock is currently priced at 78.89 dollars, the stock was priced at 71.24 dollars 1 year ago, and the stock just paid a dividend of 2.47 dollars? Answer as a rate in decimal format so that 12.34% would be entered as .1234 and 0.98% would be entered as .0098.

B. Over the past year (from one year ago to today), the inflation rate was 4.13%, the risk-free rate was 6.08%, and the real rate of return for a bond was 3.17%. The bond is currently priced at $974.00, pays annual coupons of $84.70, and just made a coupon payment. What was the price of the bond one year ago

C Over the past year (from 1 year ago to today), the inflation rate was 6.09 percent, the risk-free rate was 8.98 percent, and the real rate of return for a bond was 8.62 percent. The bond was priced at 1,288.18 dollars one year ago and 1,316.75 dollars two years ago, pays annual coupons of 55.58 dollars, and just made a coupon payment. What is the price of the bond today?

1. The 25 year old invests $2,000 a year until the age of 65
The 35 year old invests $2,000 a year until the age of 65

We’ll assume they both get the same rate of return on their dollar, in this example we’ll use 8%. Where will each of them be when they reach the age of 65? What is the difference in the two investment choice? Place the difference between the two $ amounts as your final answer. use two decimals

2.

Find the NPV  of the following cash flows.  The cost of capital is 10%.

Period                          0             1                   2                      3                      4                      

Cash Flow         - $80,000       $15,000    $10,000        $40,000           $40,000        

Indicate if you get a negative cash flow with a - sign.

3.You bought a $400k condo. You got a 15-year fixed-rate mortgage and made a 20% down payment. Your interest rate is 5% annually. What is your monthly payment?

1.) You plan to deposit $1,000 in Year 1, $1,200 in Year 2 and $2,000 in year 4 in your savings account. You think that you can earn 6% per year. How much will you have in your account in Year 6?

2.) Bank X promises to pay you $5,200 per year for 8 years, whereas Bank Y offers to pay you $7,300 per year for 5 years.

a) Which of these cash flow streams has the higher present value (PV) if the discount rate is 5 percent? (Hint: compare the PVs of annuity X ($5,200 per year for 8 years) with annuity B ($7,300 per year for 5 years)

b) Which one should you choose between Bank X and Bank Y?

3.) Today, Dinero Bank offers you a $60,000, five-year term loan at 7.5 percent annual interest (APR). What will your annual loan payment be? (Hint: Find PMT)

4.) You buy an annuity that will pay you $24,000 a year for 25 years. The payments are paid on the first day of each year. What is the value of this annuity today if the discount rate is 8.5 percent? (Hint: annuity due)

SHOW HOW YOU GOT ANSWERS PLEASE!!

On January 1 of this year, Olive Corporation issued bonds. Interest is payable once a year on December 31. The bonds mature at the end of four years. Olive uses the effective-interest amortization method. The partially completed amortization schedule below pertains to the bonds:

1. Complete the amortization schedule. (Enter all your values in positive. Round your final answers to nearest whole dollar amount.)

2. When the bonds mature at the end of Year 4, what amount of principal will Olive pay investors?

3. How much cash was received on the day the bonds were issued (sold)?

4. Were the bonds issued at a premium or a discount? If so, what was the amount of the premium or discount?

5. How much cash will be disbursed for interest each period and in total over the life of the bonds?

6. What is the coupon rate? (Enter your answer as a percentage rounded to 1 decimal place (i.e. 0.123 should be entered as 12.3).)

7. What was the annual market rate of interest on the date the bonds were issued? (Enter your answer as a percentage rounded to 1 decimal place (i.e. 0.123 should be entered as 12.3).)

8. What amount of interest expense will be reported on the income statement for Year 2 and Year 3? (Round your final answers to nearest whole dollar amount.)

The following transactions apply to Jova Company for Year 1, the first year of operation:

1. Issued $17,500 of common stock for cash.

2. Recognized $62,500 of service revenue earned on account.

3. Collected $56,000 from accounts receivable.

4. Paid operating expenses of $36,800.

5. Adjusted accounts to recognize uncollectible accounts expense. Jova uses the allowance method of accounting for uncollectible accounts and estimates that uncollectible accounts expense will be 2 percent of sales on account

The following transactions apply to Jova for Year 2

1. Recognized $70,000 of service revenue on account.

2. Collected $64,000 from accounts receivable.

3. Determined that $850 of the accounts receivable were uncollectible and wrote them off.

4. Collected $100 of an account that had previously been written off.

5. Paid $48,000 cash for operating expenses.

6. Adjusted the accounts to recognize uncollectible accounts expense for Year 2. Jova estimates uncollectible accounts expense will be 1.0 percent of sales on account

Required

Complete the following requirements for Year 1 and Year 2. Complete all requirements for Year 1 prior to beginning the requirements for Year 2.

1. Identify the type of each transaction (asset source, asset use, asset exchange, or claims exchange).

2. Show the effect of each transaction on the elements of the financial statements, using a horizontal statements model like the one shown here. Use + for increase, − for decrease, and leave the cell blank if there is no effect. Also, in the Cash Flow column, indicate whether the item is an operating activity (OA), investing activity (IA), or financing activity (FA). The first transaction is entered as an example. (Hint: Closing entries do not affect the statements model.) (If there is no effect on the Statement of Cash Flow, leave the cell blank. Not all cells will require entry.)

3. Organize the transaction data in accounts under an accounting equation.

4. Prepare the income statement, statement of changes in stockholders’ equity, balance sheet, and statement of cash flows for Year 1.

5. Prepare the income statement, statement of changes in stockholders’ equity, balance sheet, and statement of cash flows for Year 2.

1. Would you rather receive $1,000 a year for 10 years or $800 a year for 15 years if:
   
   Present Value = FV after t periods / (1+r)^t

1. The interest rate is 5 percent?

Response and rationale:



Present value = PV = future value /

2. The interest rate is 20 percent?

Response and rationale:

3. Why do your answers to “(a)” and “(b”) differ?

Response: