f you put up $31,000 today in exchange for a 9.00 percent, 14-year annuity, what will the annual cash
flow be?
rev: 09_17_2012
$2,214.29
$6,267.22
$4,208.13
$3,760.20
$3,981.43
Here we have the PVA, the length of the annuity, and the interest rate. We wan
A project has the following estimated data: price = $64 per unit; variable costs = $38.4 per unit; fixed
costs = $5,100; required return = 8 percent; initial investment = $11,000; life = seven years. Ignore the
effect of taxes.
Required:
(a) What is the a
A portfolio has 90 shares of Stock A that sell for $35 per share and 120 shares of Stock B that sell for $28
per share.
Required:
(a) What is the portfolio weight of Stock A?
0.4839
(b) What is the portfolio weight of Stock B?
0.5161
rev: 09_20_2012
Expla
Big Dom's Pawn Shop charges an interest rate of 16 percent per month on loans to its customers. Like
all lenders, Big Dom must report an APR to consumers.
Required :
(a) What rate should the shop report?
192.00%
(b) What is the effective annual rate?
493.
A firm evaluates all of its projects by using the NPV decision rule.
Year
0
1
2
3
Cash Flow
$30,000
18,000
14,000
10,000
Required:
(a) At a required return of 20 percent, what is the NPV for this project?
509.26
(b) At a required return of 35 percent, wha
At an output level of 48,000 units, you calculate that the degree of operating leverage is 1.50. If output
rises to 57,120 units, what will the percentage change in operating cash flow be? (Do not round your
intermediate calculations.)
rev: 09_18_2012
28.
An investment project has annual cash inflows of $6,600, $7,700, $8,500, and $9,800, and a discount rate of
11 percent.
Required:
What is the discounted payback period for these cash flows if the initial cost is $9,500? (Do not round your
intermediate cal
A zero coupon bond with a face value of $1,000 is issued with an initial price of $425.50. The bond
matures in 12 years. What is the implicit interest, in dollars, for the first year of the bond's life? Use
semiannual compounding.
$18.90
$9.45
$15.70
$16.
A stock has a beta of 1.45, the expected return on the market is 14 percent, and the risk-free rate is 5.6
percent. What must the expected return on this stock be?
rev: 09_20_2012
25.9%
18.49%
17.78%
16.89%
18.67%
CAPM states the relationship between the
The most recent financial statements for Zoso, Inc., are shown here (assuming no income taxes):
Income Statement
Sales
Costs
Net income
$4,400 Assets
3,440
$960
Total
Balance Sheet
$14,500 Debt
Equity
$10,900
3,600
$14,500
$14,500
Total
Assets and costs a
Consider the following simplified financial statements for the Phillips Corporation (assuming no income
taxes):
Sales
Costs
Income Statement
$25,000 Assets
12,600
Net income
$12,400 Total
Balance Sheet
$9,700 Debt
Equity
$5,000
4,700
$9,700
$9,700
Total
P
Aguilera Corp. has a current accounts receivable balance of $335,500. Credit sales for the year
just ended were $4,448,730.
What is the company's receivables turnover? (Do not round intermediate calculations. Round your
answer to 2 decimal places, e.g., 3
The most recent financial statements for Live Co. are shown here:
Income Statement
Sales
$3,500
Costs
2,310
Taxable income
$1,190
Taxes (33%)
393
Net income
$797
Current assets
Fixed assets
Total
Balance Sheet
$3,720 Debt
9,108
$12,828
Equity
Total
$7,438
The Dyrdek Co. had $279,000 in 2014 taxable income. Use the tax rates from Table 2.3.
What is the average tax rate? (Do not round intermediate calculations. Enter your answer as a percent
rounded to 2 decimal places, e.g., 32.16.)
Average tax rate
%
What
Makers Corp. had additions to retained earnings for the year just ended of $328,000. The firm paid out
$176,000 in cash dividends, and it has ending total equity of $4.81 million. The company currently has
140,000 shares of common stock outstanding.
What
A project has an initial cost of $42,000 and a four-year life. The company uses straight-line depreciation to a
book value of zero over the life of the project. The projected net income from the project is $1,400, $3,600,
$4,000, and $4,500 a year for the
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Points
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The length of time a rm
Consider the following income statement:
Sales
Costs
Depreciation
Taxes
$ 1,094,880
712,320
162,000
32 %
Required:
(a ) Calculate the EBIT.
220,560
(b )
Calculate the net income.Recall that in this chapter the interest expense is
assumed to be zero (proje
Find the APR, or stated rate, in each of the following cases.
Required:
(a) An effective interest of 9% compounded semiannually
8.81%
(b) An effective interest of 9% compounded monthly
8.65%
(c) An effective interest of 10% compounded weekly
9.54%
(d) An
Given an interest rate of 6.0 percent per year, what is the value at date t = 5 of a perpetual stream of $1,700
payments with the first payment at date t = 10?
rev: 09_29_2015_QC_CS-26908
$21,993.80
$28,433.33
$22,891.51
$21,172.31
$22,442.65
To find the
Find the EAR in each of the following cases.
Required:
(a) 8% compounded quarterly
8.24%
(b) 18% compounded monthly
19.56%
(c) 9% compounded daily
9.42%
(d) 16% with infinite compounding
17.35%
rev: 09_17_2012
Explanation:
For discrete compounding, to fin
Grohl Co. issued 13-year bonds a year ago at a coupon rate of 9 percent. The bonds make semiannual
payments. If the YTM on these bonds is 10 percent, what is the current bond price?
rev: 09_18_2012
$941.01
$1,693.93
$665.09
$931.01
$958.03
To find the pri
Geary Machine Shop is considering a four-year project to improve its production efficiency. Buying a new
machine press for $700,800 is estimated to result in $233,600 in annual pretax cost savings. The press falls
in the MACRS five-year class (MACRS Table
Consider an asset that costs $237,600 and is depreciated straight-line to zero over its 13-year tax life. The
asset is to be used in a 5-year project; at the end of the project, the asset can be sold for $29,700.
If the relevant tax rate is 32 percent, wh
Consider a project to supply 107 million postage stamps per year to the U.S. Postal Service for the
next five years. You have an idle parcel of land available that cost $1,970,000 five years ago; if the
land were sold today, it would net you $2,170,000 af
Consider the following two mutually exclusive projects:
Year
0
1
2
3
4
Cash Flow (A)
$278,619
27,200
60,000
57,000
409,000
Cash Flow (B)
$16,099
5,675
8,464
13,726
9,423
Whichever project you choose, if any, you require a 6 percent return on your investme
Consider each of the following cases:
Accounting
Break-Even
Case
1
2
3
81,400
126,000
6,275
Unit Price
Unit Variable Cost
$ 40
?
106
$ 31
51
?
Fixed Costs
$ 838,000
2,700,000
124,000
Required:
(a) Find the depreciation for Case 1. (Do not round your inter
DAR Corporation is comparing two different capital structures: an all-equity plan (Plan I) and a levered
plan (Plan II). Under Plan I, the company would have 195,000 shares of stock outstanding. Under Plan II,
there would be 145,000 shares of stock outsta
Consider the following information:
Rate of Return if State Occurs
State of Economy
Boom
Good
Poor
Bust
Probability of
State of Economy
.15
.60
.20
.05
Stock A
.31
.16
.03
.11
Stock B
.41
.12
.06
.16
Stock C
.21
.10
.04
.08
Requirement 1:
Your portfolio i
Consider the following information:
State of Economy
Recession
Normal
Boom
Probability of State of Economy
0.20
0.60
0.20
Rate of Return if State Occurs
Stock A
Stock B
0.06
-0.20
0.08
0.15
0.14
0.35
Required:
(a)
Calculate the expected return for Stock A