Question 9

One year ago, XYZ Co. issued 16-year bonds at par. The bonds have a coupon rate of 6.49 percent, paid semiannually, and a face value of $1,000. Today, the market yield on these bonds is 6.85 percent. What is the percentage change in the bond price over the past year? Answer to two decimals

Question 10

Suppose ABC Co. issues $18.37 million of 17 year zero coupon bonds today. If investors require a return of 6.18 percent compounded semiannually and all the bonds remain outstanding until they mature, how much (in $ millions) will ABC have to pay to redeem the bonds. Answer in millions to two decimals - ie, if you get $50,268,382, you should enter 50.27.

Forten Company, a merchandiser, recently completed its calendar-year 2017 operations. For the year, (1) all sales are credit sales, (2) all credits to Accounts Receivable reflect cash receipts from customers, (3) all purchases of inventory are on credit, (4) all debits to Accounts Payable reflect cash payments for inventory, and (5) Other Expenses are paid in advance and are initially debited to Prepaid Expenses. The company’s income statement and balance sheets follow. FORTEN COMPANY Comparative Balance Sheets December 31, 2017 and 2016 2017 2016 Assets Cash $67,900 $85,500 Accounts receivable 83,890 62,625 Inventory 293,656 263,800 Prepaid expenses 1,330 2,135 Total current assets 446,776 414,060 Equipment 145,500 120,000 Accum. depreciation—Equipment (42,625) (52,000) Total assets $549,651 $482,060 Liabilities and Equity Accounts payable $65,141 $132,675 Short-term notes payable 13,600 8,400 Total current liabilities 78,741 141,075 Long-term notes payable 59,000 60,750 Total liabilities 137,741 201,825 Equity Common stock, $5 par value 186,750 162,250 Paid-in capital in excess of par, common stock 49,500 0 Retained earnings 175,660 117,985 Total liabilities and equity $549,651 $482,060 FORTEN COMPANY Income Statement For Year Ended December 31, 2017 Sales $642,500 Cost of goods sold 297,000 Gross profit 345,500 Operating expenses Depreciation expense $32,750 Other expenses 144,400 177,150 Other gains (losses) Loss on sale of equipment (17,125) Income before taxes 151,225 Income taxes expense 41,050 Net income $110,175 Additional Information on Year 2017 Transactions The loss on the cash sale of equipment was $17,125 (details in b). Sold equipment costing $82,875, with accumulated depreciation of $42,125, for $23,625 cash. Purchased equipment costing $108,375 by paying $54,000 cash and signing a long-term note payable for the balance. Borrowed $5,200 cash by signing a short-term note payable. Paid $56,125 cash to reduce the long-term notes payable. Issued 3,700 shares of common stock for $20 cash per share. Declared and paid cash dividends of $52,500. Required: 1. Prepare a complete statement of cash flows; report its operating activities using the indirect method.

 The annual sales for​ Salco, Inc. were

$4.46

million last year. The​ firm's end-of-year balance sheet was as​ follows:  

. ​ Salco's income statement for the year was as​ follows:  

.

a. Calculate​ Salco's total asset​ turnover, operating profit​ margin, and operating return on assets.

b.  Salco plans to renovate one of its plants and the renovation will require an added investment in plant and equipment of

$1.04

million. The firm will maintain its present debt ratio of 50

percent when financing the new investment and expects sales to remain constant. The operating profit margin will rise to

13.4

percent. What will be the new operating return on assets ratio​ (i.e., net operating

income divided by÷total

​assets) for Salco after the​ plant's renovation?

c.  Given that the plant renovation in part

​(b​)

occurs and​ Salco's interest expense r $49,000

per​ year, what will be the return earned on the common​ stockholders' investment? Compare this rate of return with that earned before the renovation. Based on this​ comparison, did the renovation have a favorable effect on the profitability of the​ firm?

Current assets $507,000

Liabilities

$1,005,500

Net fixed assets

1,504,000

​Owners' equity

1,005,500

Total Assets

$2,011,000

Sales

$4,460,000

​Less: Cost of goods sold

(3,495,000)

Gross profit $965,000

​Less: Operating expenses

(497,000)

Net operating income

$468,000

​Less: Interest expense

(104,000)

Earnings before taxes

$364,000

​Less: Taxes

​(35%​)

(127,400)

Net income

$236,600

A traditional-furnace costs $224 and consumes $155 per year in fuel over its 11 year lifetime. A condensing-furnace costs $440 and consumes $80 per year in fuel over its 11 year lifetime. If interest rates are12% per year, which is the better investment?

One year ago, XYZ Co. issued 11-year bonds at par. The bonds have a coupon rate of 6.29 percent, paid semiannually, and a face value of $1,000. Today, the market yield on these bonds is 7.31 percent. What is the percentage change in the bond price over the past year? Answer to two decimals

Forten Company, a merchandiser, recently completed its calendar-year 2017 operations. For the year, (1) all sales are credit sales, (2) all credits to Accounts Receivable reflect cash receipts from customers, (3) all purchases of inventory are on credit, (4) all debits to Accounts Payable reflect cash payments for inventory, and (5) Other Expenses are paid in advance and are initially debited to Prepaid Expenses. The company’s income statement and balance sheets follow.

Additional Information on Year 2017 Transactions

1. The loss on the cash sale of equipment was $9,125 (details in b).
2. Sold equipment costing $58,875, with accumulated depreciation of $34,125, for $15,625 cash.
3. Purchased equipment costing $100,375 by paying $38,000 cash and signing a long-term note payable for the balance.
4. Borrowed $4,400 cash by signing a short-term note payable.
5. Paid $52,125 cash to reduce the long-term notes payable.
6. Issued 2,900 shares of common stock for $20 cash per share.
7. Declared and paid cash dividends of $50,900.

Required:
1. Prepare a complete statement of cash flows; report its operating activities using the indirect method. (Amounts to be deducted should be indicated with a minus sign.)
  

One year ago Lerner and Luckmann Co. issued 15-year, noncallable, 5.2% annual coupon bonds at their par value of $1,000. Today, the market interest rate on these bonds is 5.5%. What is the current price of the bonds, given that they now have 14 years to maturity?

Last year Carson Industries issued a 10-year, 13% semiannual coupon bond at its par value of $1,000. Currently, the bond can be called in 6 years at a price of $1,065 and it sells for $1,270.

1. What is the bond's nominal yield to maturity? Do not round intermediate calculations. Round your answer to two decimal places.
   %
   
   What is the bond's nominal yield to call? Do not round intermediate calculations. Round your answer to two decimal places.
   %
   
   Would an investor be more likely to earn the YTM or the YTC?
   -Select-Since the YTM is above the YTC, the bond is likely to be called.Since the YTC is above the YTM, the bond is likely to be called.Since the YTM is above the YTC, the bond is not likely to be called.Since the YTC is above the YTM, the bond is not likely to be called.Since the coupon rate on the bond has declined, the bond is not likely to be called.Item 3
   
2. What is the current yield? (Hint: Refer to Footnote 7 for the definition of the current yield and to Table 7.1.) Round your answer to two decimal places.
   %
   
   Is this yield affected by whether the bond is likely to be called?
   1. If the bond is called, the current yield will remain the same but the capital gains yield will be different.
   2. If the bond is called, the current yield and the capital gains yield will remain the same.
   3. If the bond is called, the capital gains yield will remain the same but the current yield will be different.
   4. If the bond is called, the current yield and the capital gains yield will both be different.
   5. If the bond is called, the current yield and the capital gains yield will remain the same but the coupon rate will be different.
   
   -Select-IIIIIIIVVItem 5
   
3. What is the expected capital gains (or loss) yield for the coming year? Use amounts calculated in above requirements for calcuation, if reqired. Round your answer to two decimal places. Enter a loss percentage, if any, with a minus sign.
   %
   
   Is this yield dependent on whether the bond is expected to be called?
   1. The expected capital gains (or loss) yield for the coming year depends on whether or not the bond is expected to be called.
   2. The expected capital gains (or loss) yield for the coming year does not depend on whether or not the bond is expected to be called.
   3. If the bond is expected to be called, the appropriate expected total return is the YTM.
   4. If the bond is not expected to be called, the appropriate expected total return is the YTC.
   5. If the bond is expected to be called, the appropriate expected total return will not change.

what is the current year's account payable balance?

what is the current year's return on assets (ROA)?

what is the current year's return on equity (ROE)?

what is the current year's entry for long-term debt on a common-sized balance sheet?

Last year Carson Industries issued a 10-year, 12% semiannual coupon bond at its par value of $1,000. Currently, the bond can be called in 6 years at a price of $1,060 and it sells for $1,150.

1. What is the bond's nominal yield to maturity? Do not round intermediate calculations. Round your answer to two decimal places.
   %
   
   What is the bond's nominal yield to call? Do not round intermediate calculations. Round your answer to two decimal places.
   %
   
   Would an investor be more likely to earn the YTM or the YTC?
   -Select-Since the YTC is above the YTM, the bond is not likely to be called.Since the coupon rate on the bond has declined, the bond is not likely to be called.Since the YTM is above the YTC, the bond is likely to be called.Since the YTC is above the YTM, the bond is likely to be called.Since the YTM is above the YTC, the bond is not likely to be called.Item 3
   
2. What is the current yield? (Hint: Refer to Footnote 7 for the definition of the current yield and to Table 7.1.) Round your answer to two decimal places.
   %
   
   Is this yield affected by whether the bond is likely to be called?
   1. If the bond is called, the current yield and the capital gains yield will both be different.
   2. If the bond is called, the current yield and the capital gains yield will remain the same but the coupon rate will be different.
   3. If the bond is called, the current yield will remain the same but the capital gains yield will be different.
   4. If the bond is called, the current yield and the capital gains yield will remain the same.
   5. If the bond is called, the capital gains yield will remain the same but the current yield will be different.
   
   -Select-IIIIIIIVVItem 5
   
3. What is the expected capital gains (or loss) yield for the coming year? Use amounts calculated in above requirements for calcuation, if reqired. Round your answer to two decimal places. Enter a loss percentage, if any, with a minus sign.
   %
   
   Is this yield dependent on whether the bond is expected to be called?
   1. If the bond is expected to be called, the appropriate expected total return will not change.
   2. The expected capital gains (or loss) yield for the coming year depends on whether or not the bond is expected to be called.
   3. The expected capital gains (or loss) yield for the coming year does not depend on whether or not the bond is expected to be called.
   4. If the bond is expected to be called, the appropriate expected total return is the YTM.
   5. If the bond is not expected to be called, the appropriate expected total return is the YTC.