Chapter 4 examples
1.A 15 year, 8% coupon rate, $1000 face value bond is currently trading at $958. The yield to
maturity of this bond must be
a. less than 8%.
b. equal to 8%.
c. greater than 8%.
d. u
Chapter 2 homework
1. If you only knew a companys total assets and total debt, which item could you easily
calculate?
a. Sales
b. Depreciation
c. Total equity
d. Inventory
2. How do we calculate a com
End of Chapter Problem 5-10
5 10 Carbohydrates Anonymous (CA) operates a chain of weight-loss centers
for carb lovers. Its services have been in great demand in recent years and its
profits have soare
End of Chapter Problem 2-5
2 5 Income Statements
Heavy Metal
Manufacturing
(HMM)
Sales
Operatingexpenses
Metallic Stamping
Inc. (MS)
High-Tech Software
Co. (HTS)
$75,000,000
65,000,000
$50,000,000
40,
End of Chapter Problem 3-18
Ruth Nail receives two offers for her seaside home. The first offer is for $1 million
today. The second offer is for an owner-financed sale with annual payments as
follows:
Chapter 3 Homework
1.Which of the following statements is true?
a. In an annuity due payments occur at the end of the period.
b. In an ordinary annuity payments occur at the end of the period.
c. A pe
Chapter 2Financial Statement and Cash Flow Analysis
MULTIPLE CHOICE
1. Which of the following items can be found on an income statement?
a. Accounts receivable
b. Long-term debt
c. Sales
d. Inventory
End of Chapter Problem 4-11
4-11 Griswold Travel Inc. has issued 6-year bonds that pay $30 in interest twice
each year. The par value of these bonds is $1,000 and they offer a yield to
maturity of 5.5
End of Chapter Problem 4-8
4-8 Calculate the price of a 5-year, $1,000 par value bond that makes
semiannual payments, has a coupon rate of 8 %, and offers a yield to maturity
of 7 %. Recalculate the p
End of Chapter Problem 4-9
4-9 A $1,000 par value bond makes annual interest payment of $75. If it offers a
yield to maturity of 7.5 %, what is the price of the bond?
This question asks to get the pri
End of Chapter Problem 4-7
4-7 A bond makes two $45 interest payments each year. Given that the bonds
par value is $1,000 and its price is $1,050, calculate the bonds coupon rate and
coupon yield.
Ste
End of Chapter Problem 4-23
4-14 What is the price of a zero-coupon bond that has a par value of $1,000?
The bond matures in thirty years and offers a yield to maturity of 4.5 %.
Calculate the price o
End of Chapter Problem 5-1
5 -1 Argaiv Towers has outstanding an issue of preferred stock with a par value
of $100. It pays an annual dividend equal to 8 % of par value. If the required
return on Arga
End of Chapter Problem 5-4
5 4 Suppose a preferred stock pays a quarterly dividend of $2 per share. The
next dividend comes in exactly one-fourth of a year. If the price of the stock is
$80, what is t
End of Chapter Problem 4-6
4-6 A bond offers a coupon rate of 5 %. If the par value is $1,000 and the bond
sells for $1,250, what is the coupon yield?
Step 1 Find the coupon for the $1000 par bond:
5%
End of Chapter Problem 3-11
Robert Williams is considering an offer to sell his medical practice, allowing him to
retire five years early. He has been offered $500,000 for his practice and can invest
End of Chapter Problem 2-5
2 5 Income Statements
Heavy Metal
Manufacturing
(HMM)
Sales
Operatingexpenses
Metallic Stamping
Inc. (MS)
High-Tech Software
Co. (HTS)
$75,000,000
65,000,000
$50,000,000
40,
End of Chapter Problem 2-2
2 2 Given the balance sheets and selected data from the income statement of
SMG Industries that follow, answer parts (a)(c).
a.Calculate the firms operating cash flow (OCF)
End of Chapter Problem 3-16
In this problem you are give two series of cash flows (A and B). Both cash flows total
$150,000 over the 5 years. The problem highlights the timing aspect and how it
affect
End of Chapter Problem 2-4
Manufacturers Bank is evaluating Aluminum
Industries, Inc., which has requested a $3 million
loan, to assess the firms financial leverage and risk.
On the basis of the debt
End of Chapter Problem 3-23
Consumer Insurance, Inc. sells extended warranties on appliances that provide
coverage after the manufacturers' warranties expire. An analyst for the company
forecasts that
End of Chapter Problem 4-14
4-14 A bond makes annual interest payments of $75. The bond matures in 4
years, has a par value of $1,000, and sells for $975.30. What is the bonds yield
to maturity (YTM)?
End of Chapter Problem 4-18
4-14 The rate of inflation is 5 % and the real interest rate is 3 %. What is the
nominal interest rate?
Using the Equation 4.4 on page 125.
(1+rnominal) = (1+iinflation) *
End of Chapter Problem 5-17
5-17 Stephenson Technologies (ST) produces the worlds greatest single-lensreflex (SLR) camera. The camera has been a favorite of professional
photographers and serious amat
End of Chapter Problem 6-1
6-1 You purchase 1,000 shares of Spears Grinders Inc. stock for $45 per share.
A year later, the stock pays a dividend of $1.25 per share and it sells for $49.
a.
Calculate
End of Chapter Problem 6-2
6-2 A financial adviser claims that a particular stock earned a total return of 10
% last year. During the year the stock price rose from $30 to $32.50. What
dividend did th
End of Chapter Problem 12 - 5
12 5 Assume that capital markets are perfect. A firm finances its operations
with $50 million in stock, with a required return of 15 percent, and $40 million in
bonds wit
End of Chapter Problem 12 - 1
12 1 As Chief Financial Officer of the Magnificent Electronics Corporation
(MEC), you are considering a recapitalization plan that would convert MEC from
its current all-
End of Chapter Problem 12 - 19
12 19 Magnum Enterprises has net operating income of $5 million; there is $50
million of debt outstanding with a required rate of return of 6 percent; the required
rate
An ordinary annuity is best defined by which one of the following?
A. increasing payments paid for a definitive period of time
B. increasing payments paid forever
C. equal payments paid at regular int
SAMPLE MIDTERM 2
National Trucking has paid an annual dividend of $1.00 per share on its
common stock for the past fifteen years and is expected to continue paying a
dollar a share long into the futur