Chapter 6
1. Determine the value of a $1,000 Canadian Pacific Limited perpetual 4 percent
debenture (bond) at the following required rates of return:
a. 4 percent
b. 5 percent
c. 6 percent
P=I/kd
I=1000*0.04=40
a. 4 percent= 40/0.04=1000
b. 5percent=40/0.
Chapter 4
Problem 2 Prepare a statement of cash flows (using the indirect method) for the
Midland Manufacturing Corporation for the year ending December 2013, based on the
following comparative balance sheets.
Midland Manufacturing Corporation Statements
Chapter 8
1. You have estimated the following probability distributions of expected future
returns for Stocks X and Y:
Stock X
Probability
Stock Y
Return
Probability
0.1
10%
0.2
10
0.2
0.2
7
0.4
15
0.3
12
0.2
20
0.2
15
0.1
40
0.1
Return
2%
16
a. What is t
Chapter 5
2. If you require a 9 percent return on your investments, which would you prefer?
a. $5,000 today
b. $15,000 five years from today
c. $1,000 per year for 15 years
b. PV of $15,000 received in 5 year at 9%:
PV= 15,000(PVIF9%,5)=15,000(1/(1+0.09)5
Calculate the annual straight-line depreciation for a machine that costs $50,000 and has installation
and shipping costs that total $1000. The machine will be depreciated over a period of 10 years. The
companys marginal tax rate is 40 percent.
Cost of the
Chapter 7
2. The Foreman Companys earnings and common stock dividends have been growing
at an annual rate of 6 percent over the past 10 years and are expected to continue
growing at this rate for the foreseeable future. The firm currently (that is, as of