Consider the following three zero-coupon bonds: Bond Face Value Time to Maturity (Years) Market Price 1 $1,000 1 $940 2 $1,000 2 $820 3 $1,000 3 $768 a). Calculate the one-, two-, and three-year spot rates

b). Calculate the forward rate over the second year, and the one corresponding to the third year.

c). What price of the third bond would risk-neutral investors expect to prevail at the end of the second year?

d). Now assume that investors are risk averse with a two-year investment horizon. Further assume that for every year at maturity beyond two years, investors demand a 1.5% liquidity premium. What price of the third bond would risk-averse investors expect to prevail at the end of the second year?

West Hills Village (WHV) in Rapid City, South Dakota is evaluating a guideline lease agreement on laundry equipment that costs $250,000 and falls into the MACRS three-year class. The home can borrow at an 8 percent rate on a four-year loan if WHV decided to borrow and buy rather than lease. The laundry equipment has a four-year economic life, and its estimated residual value is $50,000 at the end of Year 4. If WHV buys the equipment, it would purchase a maintenance contract which costs $5,000 per year, payable at the beginning of each year. The lease terms, which include maintenance, call for a $71,000 lease payment at the beginning of each year. WNV's tax rate is 40 percent. Should the home lease or buy?

Please show how to do this in excel

6b3

Green Landscaping, Inc. is using net present value (NPV) when evaluating projects. Green Landscaping’s cost of capital is 10.30 percent. What is the NPV of a project if the initial costs are $2,106,000 and the project life is estimated as 10 years? The project will produce the same after-tax cash inflows of $512,558 per year at the end of the year.

Round the answer to two decimal places.

Your Answer:

6c3

Find the internal rate of return (IRR) for the following series of future cash flows. The initial outlay is $680,025.

Year 1: 189,200

Year 2: 141,300

Year 3: 192,700

Year 4: 164,900

Year 5: 187,000

Round the answer to two decimal places in percentage form. (Write the percentage sign in the "units" box)

You should use Excel or financial calculator.

Consider the Leverage Unlimited, Inc., zero coupon bonds of Year 22. The bonds were issued in Year 1 for $100. Determine the yield-to-maturity if the bonds are purchased at the following price. Round PVIF value in intermediate calculations to three decimal places. Use Table II to answer the question. Round your answers to one decimal place.

A). Issue price of $100 in Year 1. (Note: To avoid a fractional year holding period, assume that the issue and maturity dates are at the midpoint—July 1—of the respective years.   %

B). Market price as of July 1, Year 19, of $850. %

c). Explain why the returns calculated in Parts a and b are different. Over the period from Year 1 to Year 19, the general level of interest rates declined, causing bond prices to ______and yields to_______ .

Disposal of Fixed Asset

Equipment acquired on January 6 at a cost of $422,300, has an estimated useful life of 9 years and an estimated residual value of $55,100.

a. What was the annual amount of depreciation for the Years 1-3 using the straight-line method of depreciation?

Year

Depreciation Expense

Year 1

$

Year 2

$

Year 3

$

b. What was the book value of the equipment on January 1 of Year 4?

$

c. Assuming that the equipment was sold on January 3 of Year 4 for $284,900, journalize the entry to record the sale. If an amount box does not require an entry, leave it blank.

d. Assuming that the equipment had been sold on January 3 of Year 4 for $305,900 instead of $284,900, journalize the entry to record the sale. If an amount box does not require an entry, leave it blank.

A stock market investor is interested in determining whether there is a significant difference in the P/E (price to earnings) ratio for companies from one year to the next. Six companies are randomly selected and their P/E ratios for Year 1 and Year 2 are recorded. Are the P/E ratios for Year 1 greater than for Year 2? Use a 10% level of significance.

Find the standard deviation of the differences.

5. State the critical value which separates the acceptance and rejection regions.
6. Evaluate the test statistic.
7. Would you accept or reject the hypothesis? Explain why you made the decision you did.

Ringmeup Inc. had net income of $112,800 for the year ended December 31, 2019. At the beginning of the year, 36,000 shares of common stock were outstanding. On May 1, an additional 14,000 shares were issued. On December 1, the company purchased 4,800 shares of its own common stock and held them as treasury stock until the end of the year. No other changes in common shares outstanding occurred during the year. During the year, Ringmeup paid the annual dividend on the 6,000 shares of 3.30%, $100 par value preferred stock that were outstanding the entire year.

Required:
Calculate basic earnings per share of common stock for the year ended December 31, 2019. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

On January 1 year 1, superstar company leased a building to pzed  Inc. The lease arrangement is for 20 years. The building is expected to have no residual value at the end of the lease. The leased building has a cost of $21,000,000 and was purchased for cash on January 1, year 1. The building is depreciated on a straight-line basis. Its estimated economic life is 50 years with no salvage value. Lease payments are $1,778,000 per year and are made at the beginning of the year. Superstar has an incremental borrowing rate of 8%, and the rate implicit in the lease is unknown to Pzed. Both the lessor and the lessee are on a calendar-year basis.

1) Prepare the journal entries that superstar company should make in 2 year 1

2) Prepare the journal entries that PZED should make in Year 1.

A machine costing $209,200 with a four-year life and an estimated $18,000 salvage value is installed in Luther Company’s factory on January 1. The factory manager estimates the machine will produce 478,000 units of product during its life. It actually produces the following units: 123,000 in 1st year, 124,100 in 2nd year, 121,200 in 3rd year, 119,700 in 4th year. The total number of units produced by the end of year 4 exceeds the original estimate—this difference was not predicted. (The machine must not be depreciated below its estimated salvage value.)

Required:

Compute depreciation for each year (and total depreciation of all years combined) for the machine under each depreciation method. (Round your per unit depreciation to 2 decimal places. Round your answers to the nearest whole dollar.)