Your uncle died last year and left you money in his will. You are to receive $50,000 next year (in
time 1) and $100,000 ten years from today (i.e., in time 10).
(a) What is the value of the inheritance today (in time 0) if the appropriate
Calculating Actual Return
You purchased 1,000 shares of stock for $33 per share exactly one year ago. During the year, the
stock paid a $.50 dividend per share and the current stock price is $27 per share. The inflation
rate the last year was 2%. Answer t
Calculating Net Present Value
BMT has developed a new product. It can go into production for an initial investment of
$5,000,000. The equipment will be depreciated using straight-line depreciation over 4
years to a value of zero.
The firm believes that ne
Large Industries annual bonds are selling at 99 (i.e., the price is $990 for the $1,000
There are 8 years remaining until maturity on the bonds and the yield to maturity is
7.75%. Find the coupon rate. (Note: you may have to use a tria
Finding Current Exchange Rate
One year ago, an American investor bought 1000 shares of London Bridges at a price of
22 (or 22 UK pounds) per share when the exchange rate was $1.5/1 (or $1.50 dollars =
1 pound). The investor also invested 800,000 Japanese
Book Value of Equity:
Par value + Capital paid in excess of par
Book Value vs. Market Value
Book value is a backward looking measure.
o It tells us how much capital the firm has raised from shareholders in the
Finding Net Equity
Common Products has issued its $.005 par value stock in two separate financing transactions.
Transaction 1: five years ago, the founder of the company purchased 2,000,000 shares of stock
for $50,000. Transaction 2: last year the company
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Calculating the Required Rate of Return
The total book value of WTCs equity is $20 million and book value per share outstanding is
The stock of WTC is currently selling for a price of $25 per share and the beta of
WTC is .85.
The bonds of WTC have a
Semi-Strong Form of Market Efficiency
Find an announcement of new information made within a month from today (i.e., earnings
announcement, merger, etc.) for any publicly traded stock that moves the stock price at least 1%.
Print out or draw a chart that s