exam4a.ch7ch8ch9ch10 - Name _ Webct ID _ University of...

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Name _________________________________ Webct ID _________________________________ University of Houston Bauer College of Business Finance 3332 Principles of Financial Management Exam 4A: Summer, 2007 To receive full credit, show all work—equations in variable form, equations with numbers plugged in—and clearly indicate your answer. Calculator financial function inputs must also be shown. Interest rates should be carried to a minimum of four decimal places. Point values are in parentheses. 1. What is the yield to maturity of a $1000 par value bond which matures in 8 years, pays a six percent annual coupon,  and sells for $940.29? (7) 2.  Circle the term that correctly completes the following statement: (2) The bond from #1 is selling at: a discount par a premium Use the following information to answer questions 3 – 5. An investment project requires a net investment of $50,000. The project is expected to generate annual net cash flows of  $8000 for the next 12 years. The firm's cost of capital is 16 percent and marginal tax rate is 40 percent. 3. Use the NPV method to determine whether or not the project should be accepted. (6) 4. Use the IRR method to determine whether or not the project should be accepted. (6) 5. Use the PI method to determine whether or not the project should be accepted. (5) 6. A project has an installed cost of $700,000. The project replaces an existing piece of equipment that has an estimated  salvage value of $12,000 and has a book value of $8000. The firm’s marginal tax rate is 40 percent, and a return of 14  percent is required on projects of this type. What is the  Net Investment  for this project? (6) 7. What is the value of a $1000 par bond paying a 4 percent semi-annual coupon and maturing in 22 years if investors 
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This note was uploaded on 02/13/2011 for the course FINA 3332 taught by Professor Darlachisholm during the Spring '08 term at University of Houston.

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exam4a.ch7ch8ch9ch10 - Name _ Webct ID _ University of...

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