5. There is a 12-year bond with a par of $1,000 and a coupon of 6.22%. Suppose the bond is bought today at a price of $1,032.60, and the market interest rate is 5.82%.

It turns out that in 3 years an investor sells the bond at a price of $1,019.12. Calculate the annual realized return over the 3 years the investor held the bond.  Show your work and explain.

A project with an initial investment of $46,000 and cash inflows of $11,000 a year for six years, calculate NPV given a required return of 12%/year.

Select one:

a. $888

b. -$347

c. -$1,205

d. -$775

e. $1,699

the Florida lottery Agrees to pay the winner $283,000 at the end of the year for the next 20 years. What is the future value of this prize if each payment is put in an account earning 0.09?

A piece of equipment will save $8000 the first year and the savings will increase by 5% per year for the next 10 years. If the interest rate is 10% per year, how much can you spend on the equipment based on the savings. Ans $xxxxx

You purchased 250 shares of a particular stock at the beginning of the year at a price of $87.25. The stock paid a dividend of $1.15 per share, and the stock price at the end of the year was $94.86. (4 points)

a) What was the dividend yield?

b) What was the capital gains yield?

We are at the end of the fourth year of the current presidential administration. During the first three and a half years the markets have skyrocketed to new highs. In the past six months the market has been fairly rocky due to the pandemic. What are your expectations for the economy and the financial markets in the next two years? What about the overall economy?

ABC Company is in the process of preparing a budget for the upcoming year. The marketing department has just increased the number of units in the sales budget by a significant 50% as compared to the last sales budget that was prepared for the year. Explain the impact this change will have on the Contribution Margin Income Statement.

Be specific about…

how the components of the Income Statement will be affected.

what company managers must do differently to implement the revised budget.

The price of a stock is $40. The price of a 1-year European put on the stock with a strike price of $30 is quoted as $7 and the price of a 1-year European call option on the stock with a strike price of $50 is quoted as $5.

(a) Suppose that an investor buys the stock, shorts the call option, and buys the put option. Calculate the profit function and draw a diagram illustrating how the investor's profit or loss varies with the stock price at expiration. Is the graph similar to any of the strategies covered in class? Identify the prices at which you break even with this strategy. What is the most you can win and the most you can lose?

(b) Calculate also the profit function and the profit/loss diagram assuming the investor buys the stock, shorts 2 call options and buys 2 put options.

Assume that we are now at the beginning of year 2020 and are trying to evaluate Company A using different valuation models. Answer all of questions below.   
1) The current leveraged beta of Company A is estimated to be 2.0 and the marginal tax rate is 40%. The risk-free rate for all the maturity is 3% and the market risk premium is 6.62%. Its debt-to-equity ratio is 1.00 currently. Next year, Company A expects to increase its debt-to-equity ratio to 1.50. Please calculate Company A’s current cost of equity, and estimate its cost of equity after it increases its debt-to-equity ratio.
2) Company A is facing a very competitive market condition and the projected free cash flow to the firm for the next five years are 500 million, 550 million, 600 million, 620 million, 650 million. Then it is expected to grow at a 3% beyond the fifth year. The WACC of the firm is estimated to be 10% and will not change in the future. Please use the “Perpetuity Growth Method” and estimate the firm’s enterprise value at the beginning of the year 2020(now).
3) The following table presents the EV/EBITDA information about Company A’s comparable companies.
Comparable Firm Information
Company Name EV/EBITDA
Company B 8.5 Company C 8.0 Company D 7.8
Besides, we also know that the EBITDA of Company A is 1500 million and its net debt is 6500 million. Its number of fully diluted shares is 100 million. Please estimate the firm’s share price range (+/- 1*standard deviation).

The current price of a stock is $48. In 1 year, the price will be either $55 or $31. The annual risk-free rate is 6.6%. Find the price of a call option on the stock that has a strike price of $50 and that expires in 1 year. ( Use daily compounding.)     

                   
                     Inputs                      
P0   = ?    u   = ?
X = ?    d   = ?
                      
Cu   = ? Pu   = ?
Cd   = ? Pd   = ?