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Tim Armour Midterm 1

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s. They link to this summary below the eet and the Scrap Sheet fosr calculations grade. Every question is worth 5 points. ompany but the Financials are provided e, sign and bring to Points Earned 0Name 0ID 0 BEFORE STARTING SAVE THE EXAM AS FirstNameLastNam 0 0 0 0 0 0 oints.
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Question 1 Question 2 Question 3 Question 4 Question 5 Question 6 Question 7 Do NOT Answer on This Sheet. Use the designated Answer Sheets and Scrap Sheets as that will assist in grading and ensure grading equity. BEFORE you get started, save this exam as your First Name and Last Name A \$1,000 par value bond pays interest of \$25 each quarter and will mature in 10 years. If your nominal annual required rate of return is 12 percent with quarterly compounding, how much should you be willing to pay for this bond? You are the owner of 100 bonds issued by Euler, Ltd. These bonds have 8 years remaining to maturity, an annual coupon payment of \$80, and a par value of \$1,000. Unfortunately, Euler is on the brink of bankruptcy. The creditors, including yourself, have agreed to a postponement of the next 4 interest payments (otherwise, the next interest payment would have been due in 1 year). The remaining interest payments, for Years 5 through 8, will be made as scheduled. The postponed payments will accrue interest at an annual rate of 6 percent, and they will then be paid as a lump sum at maturity 8 years hence. The required rate of return on these bonds, considering their substantial risk, is now 28 percent. What is the present value of each bond? A stock is not expected to pay a dividend over the next four years. Five years from now, the company anticipates that it will establish a dividend of \$1.00 per share (i.e., D 5 = \$1.00). Once the dividend is established, the market expects that the dividend will grow at a constant rate of 5 percent per year forever. The risk-free rate is 5 percent, the company's beta is 1.2, and the market risk premium is 5 percent. The required rate of return on the company’s stock is expected to remain constant. What is the current stock price? Rautatelakka has \$20 Million in net operating capital. The company's WACC is 10%, If the company's Sales are \$15 Mn, Operating Costs are \$7 Mn, Interest Expense is \$2.5Mn and Taxes are at 40%, what is Rautatelakka's EVA Blue Sky Inc. has the following information for the previous year: Net income = \$500; Net operating profit after taxes (NOPAT) = \$700; Total assets = \$2,000; and Total net operating capital = \$1800. The
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