A $300,000 investment is made with anticipated cash flows of $65,000 a year for twelve years and a final payment of $261,100 in year thirteen.

a.) What is the expected return on this investment? b.) What would one pay for this investment and the end of year five assuming a required rate of return equals 21% and the expected cash flows are not expected to change? c.) What return would the seller earn? d.) Assume that expectations have changed at end of year five and cash flows will be $85,00/year in years 6 thru 12 and the terminal payment stays the same. What price would the buyer pay using 21% as the required rate of return. e.) What return would the seller earn? f.) What return would the buyer earn assuming the change cash flows does occur. g.) Briefly comment on how changes in expectations impact a buyer’s and seller’s rate of return.

what more information would you like me to provide?

Suppose that the consensus forecast of security analysts of NoWork Inc. is that earnings next year will be E1 = $5.00 per share. The company tends to plow back 60% of its earnings and pay the rest as dividends. The CFO estimates that the company’s growth rate will be 8% from now on.

(b) Suppose you observe that the stock is selling for $50.00 per share, and that this is the best estimate of its equilibrium price. What would you conclude about either (i) your estimate of the stock’s required rate of return or (ii) the CFO’s estimate of the company’s future growth rate?

(c) Suppose there is uncertainty about the growth rate. With 50% probability the growth rate will be 6%, with 50% probability the growth rate will be 10%. What are the respective market values under the two growth rates? What must be the price of the stock, given that both growth rates have equal probability?

(d) Under the probabilities in (c) the expected growth rate of the firm is 8%. How come the valuation in part (c) is different from the valuation in part (a)?

The real risk-free rate of interest is 3.1%.  Inflation is expected to be 5% this year and 6% during the next 2 years.  Assume that the maturity risk premiums is zero.  What is the yield on 1-year treasury securities? Write your answer as a percent (do not type the % character - if your answer is 8.8% write 8.8 in the answer).

Foto Company makes 50,000 units per year of a part it uses in the products
it manufactures. The cost per unit of this part is shown below:

direct materials .............. $13.00
direct labor ..................  10.10
variable overhead .............   6.50
allocated fixed overhead ......   8.60
total ......................... $38.20

An outside supplier has offered to sell Foto Company 50,000 of these parts
for $31.60 per unit. If the company accepts this offer, the facilities now
being used to make the part could be used to make more units of a product
that is in high demand. The additional contribution margin earned on this
other product would be $120,000 per year.

Calculate the selling price per unit charged by the outside supplier that
would make Foto economically indifferent between making and buying the part.

Find the duration of a 3-year bond with annual coupon payments of $80 and a par

value of $1,000. The current market price of the bond is $950.25. If the YTM of

the bond dropped by 1%, what would happen to the bond price?

NOTE: please help especially on the duration part

Eric, who is single with no dependents, has the following for the calendar year 2018:

RECEIPTS FOR YEAR

Salary as Walmart greeter                                                              $ 16,200

Interest from Friendly Bank                                                                 2,236

Interest from City of Chula Vista                                                        2,000

Dividends from U.S. corporations                                                            69

Social Security benefits                                                                        18,000

EXPENDITURES FOR YEAR

Contribution to IRA                                                                                      920

Unreimbursed medical expense                                                            1,200

Home mortgage interest                                                                          3,400

State income and property taxes                                                          3,200

Charitable contributions of cash                                                           5,400

Tax preparation fee                                                                                       175

Eric claims two exemptions.

How much is Eric’s adjusted gross income?

Assuming your answer to “1” was $22,000, how much is Eric’s taxable income?

Based on your answer to “2”, how much is Eric’s federal income tax?

*SHOW WORK*

You plan to borrow $35,000 at an 8% semiannual interest rate. It is a 3 year loan that requires 6 payments to fully amortize.

a) Calculate the amount of semiannual payment you would be making every period?

b) Set-up an amortization schedule.

Minden Company introduced a new product last year for which it is trying to find an optimal selling price. Marketing studies suggest that the company can increase sales by 5,000 units for each $2 reduction in the selling price. The company’s present selling price is $96 per unit, and variable expenses are $66 per unit. Fixed expenses are $839,700 per year. The present annual sales volume (at the $96 selling price) is 25,800 units.

Required:

1. What is the present yearly net operating income or loss?

2. What is the present break-even point in unit sales and in dollar sales?

3. Assuming that the marketing studies are correct, what is the maximum annual profit that the company can earn? At how many units and at what selling price per unit would the company generate this profit?

4. What would be the break-even point in unit sales and in dollar sales using the selling price you determined in (3) above (e.g., the selling price at the level of maximum profits)?

The Distance Plus partnership has the following capital balances at the beginning of the current year:

Following are the auditor’s calculation of two key ratios for Audisys Corporation for the current year, previous year, and the percentage change.  The primary purpose of this information is to direct the auditor’s attention to areas requiring greater audit effort.

Required:

State whether there is a need to investigate the results further and, if so, the reason for further investigation.

State the areas/accounts that would require special emphasis in the audit investigation.

What additional tests would be done as part of the investigation?