(Solution) If Tall Paul Can Earn 6.5% On Comparable Bonds, What Value Would He Place On Bonds Issued By The Bieg Company That Have An 5. | Snapessays.com


(Solution) If Tall Paul can earn 6.5% on comparable bonds, what value would he place on bonds issued by the Bieg Company that have an 5.


1. If Tall Paul can earn 6.5% on comparable bonds, what value would he place on bonds issuedby the Bieg Company that have an 5.25% coupon rate, semi-annual payments, $1,000 facevalue, and 10 years to maturity? (Round Your Answer to 2 Decimal Places: X.XX)2. The McDonnell Company has outstanding bonds with a coupon rate of 6.75% and semiannual payments. The bonds are redeemable at their face value on December 30, 2032. IfWeege can earn 5% on comparable investments and settle the transaction on March 24, 2015,how much should he be willing to pay per $100 of face value for the bond? (Round YourAnswer to 2 Decimal Places: X.XX)3. A 10-year, 12% semiannual coupon bond with a par value of $1000 may be called in fouryears at a call price of $1,060. The bond sells for $1,100. Assume that the bond has just beenissued.What is the bond’s yield to maturity? (Round Your Answer as a Percentage with 2 DecimalPlaces, For Example: X.XX%)4. A 10-year, 12% semiannual coupon bond with a par value of $1000 may be called in fouryears at a call price of $1,060. The bond sells for $1,100. Assume that the bond has just beenissued.What is the bond’s current yield? (Round Your Answer as a Percentage with 2 Decimal Places,For Example: X.XX%)5. A 10-year, 12% semiannual coupon bond with a par value of $1000 may be called in fouryears at a call price of $1,060. The bond sells for $1,100. Assume that the bond has just beenissued.What is the bond’s capital gain or loss yield? (Round Your Answer as a Percentage with 2Decimal Places, For Example: X.XX%)6. A 10-year, 12% semiannual coupon bond with a par value of $1000 may be called in fouryears at a call price of $1,060. The bond sells for $1,100. Assume that the bond has just beenissued.What is the bond’s yield to call? (Round Your Answer as a Percentage with 2 Decimal Places, ForExample: X.XX%)7. Onions Tatlow Enterprises is considering a capital project that has a one year life and projectreturns dependent on the state of the economy. The estimated rates of return are shownbelow:STATE OFTHE ECONOMYBoomNormalRecessionPROBABILITYOF EACH STATEOCCURRING.20.40.40RATES OF RETURNIF STATE OCCURS20%10-8What is the project’s expected return? (Round Your Answer as a Percentage with 2 DecimalPlaces, For Example: X.XX%)8. Onions Tatlow Enterprises is considering a capital project that has a one year life and projectreturns dependent on the state of the economy. The estimated rates of return are shownbelow:STATE OFTHE ECONOMYBoomNormalRecessionPROBABILITYOF EACH STATEOCCURRING.20.40.40RATES OF RETURNIF STATE OCCURS20%10-8What is the project’s standard deviation? (Round Your Answer as a Percentage with 2 DecimalPlaces, For Example: X.XX%)9. Onions Tatlow Enterprises is considering a capital project that has a one year life and projectreturns dependent on the state of the economy. The estimated rates of return are shownbelow:STATE OFTHE ECONOMYBoomNormalRecessionPROBABILITYOF EACH STATEOCCURRING.20.40.40RATES OF RETURNIF STATE OCCURS20%10-8What is the project’s Coefficient of Variation? (Round Your Answer to 2 Decimal Places)10. The Geezer Keyes Company is considering two capital projects that have a one year life andproject returns dependent on the state of the economy. The estimated rates of return areshown below:STATE OFTHE ECONOMYPROBABILITYOF EACH STATEOCCURRINGBoomNormalRecession.20.40.40Expected ReturnStandard Deviation6.80%2.64%RATES OF RETURNIF STATE OCCURSA4%5%10 %B25%12%-2%9.00%10.12%What is the covariance of the returns for projects A and B? (Round Your Answer as a Percentagewith 2 Decimal Places, For Example: X.XX%)11. The Geezer Keyes Company is considering two capital projects that have a one year life andproject returns dependent on the state of the economy. The estimated rates of return areshown below:STATE OFTHE ECONOMYBoomNormalRecessionExpected ReturnStandard DeviationPROBABILITYOF EACH STATEOCCURRING.20.40.40RATES OF RETURNIF STATE OCCURSA4%5106.80%2.64%B25%12-29.00%10.12%What is the correlation of the returns for projects A and B? (Round Your Answer as aPercentage with 2 Decimal Places, For Example: X.XX%)12. If the risk free rate of return is 2% and the expected return on the market is 8%, what rate ofreturn would investors require on a stock of the Big Bob Kostin Company with a beta of1.75? (Round Your Answer as a Percentage with 2 Decimal Places, For Example: X.XX %)13. The Porch Higgins Company’s last dividend was $2.50. The current price of the stock is $50and the firm is expected to grow 5% per year.What is the firm’s dividend yield? (Round Your Answer as a Percentage With 2 Decimal Places,For Example: X.XX%)14. The Porch Higgins Company’s last dividend was $2.50. The current price of the stock is $50and the firm is expected to grow 5% per year.What is the firm’s capital gains yield? (Round Your Answer as a Percentage With 2 DecimalPlaces, For Example: X.XX%)15. The Porch Higgins Company’s last dividend was $2.50. The current price of the stock is $50and the firm is expected to grow 5% per year.What is the expected yield on the stock? (Round Your Answer as a Percentage With 2 DecimalPlaces, For Example: X.XX%)16. You have been asked to value the common stock of the Lumpy Boothman Company. Thefirm’s last dividend was $3.00. You expect the firm’s dividends to grow by 4%. If an investor canearn a 9% return on comparable investments, what would be the value of the stock? (RoundYour Answer to 2 Decimal Places)17. The Bad Man Frazier Company has a historical growth in its free cash flows of 4% with littlevariability. With the addition of a new plant and equipment, however, you expect that free cashflows will grow 3% in year 1, 5% in year 2, 7% in years 3 to 5, and 5% thereafter. The firm’s lastfree cash flow was $175,000. The firm has a required rate of return of 10%. The book value ofoperating assets is $1,000,000. The market value of non-operating assets is $900,000. Themarket value of the firm’s debt is $1,500,000 and the market value of the preferred stock is$500,000. What will be the market value of the firm’s common equity? (Round Your Answer toThe Nearest Dollar)18. The Johnny Joe McGovern Company has the following capital structure that it considersoptimal:DEBTPREFERRED STOCKCOMMON STOCK30%10%60%The firm plans to spend $100,000,000 on new capital projects. New bonds can be sold at parwith an 8% coupon rate. Preferred stock can be sold with a dividend of $2.75, a par value of$25.00, and a floatation cost of $2.00 per share. Common stock is presently selling at $35.00per share. The last dividend paid was $3.00 and the firm expects to grow at a rate of 4% in theforeseeable future. The firm's marginal tax rate is 40%. Calculate the firm’s weighted averagecost of capital. (Round Your Answer as a Percentage With 2 Decimal Places, For Example: X.XX%)19. You are the financial analyst for the Glad It’s Finally Over Company. The director of capitalbudgeting has asked you to analyze a proposed capital investment. The project has a cost of$20,000, and the cost of capital is 10 percent. The project’s expected net cash flows are asfollows:Year01234Expected Net Cash Flow($20,000)9,5006,0006,0004,000What is the project’s payback period? (Round Your Answer to 2 Decimal Places)20. You are the financial analyst for the Glad It’s Finally Over Company. The director of capitalbudgeting has asked you to analyze a proposed capital investment. The project has a cost of$20,000, and the cost of capital is 10 percent. The project’s expected net cash flows are asfollows:Year01234Expected Net Cash Flow($20,000)9,5006,0006,0004,000What is the project’s discounted payback? (Round Your Answer to 2 Decimal Places)21. You are the financial analyst for the Glad It’s Finally Over Company. The director of capitalbudgeting has asked you to analyze a proposed capital investment. The project has a cost of$20,000, and the cost of capital is 10 percent. The project’s expected net cash flows are asfollows:Year0Expected Net Cash Flow($20,000)12349,5006,0006,0004,000What is the project net present value? (Round Your Answer to 2 Decimal Places)22. You are the financial analyst for the Glad It’s Finally Over Company. The director of capitalbudgeting has asked you to analyze a proposed capital investment. The project has a cost of$20,000, and the cost of capital is 10 percent. The project’s expected net cash flows are asfollows:Year01234Expected Net Cash Flow($20,000)9,5006,0006,0004,000What is the internal rate of return? (Round Your Answer as a Percentage With 2 Decimal Places,For Example: X.XX%)23. You are the financial analyst for the Glad It’s Finally Over Company. The director of capitalbudgeting has asked you to analyze a proposed capital investment. The project has a cost of$20,000, and the cost of capital is 10 percent. The project’s expected net cash flows are asfollows:Year01234Expected Net Cash Flow($20,000)9,5006,0006,0004,000What is the project’s modified internal rate of return? (Round Your Answer as a Percentage With2 Decimal Places, For Example: XX.XX%)24. You are the financial analyst for the Glad It’s Finally Over Company. The director of capitalbudgeting has asked you to analyze a proposed capital investment. The project has a cost of$20,000, and the cost of capital is 10 percent. The project’s expected net cash flows are asfollows:Year0Expected Net Cash Flow($20,000)12349,5006,0006,0004,000What is the project’s profitability index? (Round Your Answer to 2 Decimal Places)

 


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