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Chapter 4 Extra Questions
4. You have just received a windfall from an investment you made in a friends business. She
will be paying you $10,000 at the end of this year, $20,000 at the end of the following year, and
$30,000 at the end of the year after th
Risk and Return
Brigham
ST-2 Realised Rates of Return
Stocks A and B have the following historical returns:
Year
Stock As Returns, rA
Stock Bs Return rB
2007
(24.25%)
5.5%
2008
18.5
26.73
2009
38.67
48.25
2010
14.33
(4.5)
2011
39.13
43.86
a. Calculate the
Fundamental of Capital Budgeting
Brigham
12-8 New Project Analysis
You must evaluate the purchase of a spectrometer for the R&D department. The base price is
$140,000, and it would cost another $30,000 to modify the equipment for special use by the firm.
Cost of Capital
Brigham
10-1 After Tax Cost of Debt
The Heuser Co.s currently outstanding bonds have a 10% coupon and a 12% yield to maturity.
Heuser believes it could issue new bonds at par that would provide a similar yield to maturity. If its
marginal
Options
1. A _ option gives its owner the opportunity to buy a stock at a specified price that is
generally called the _ price. A _ option gives its the opportunity to sell stock at a
specified price. Options that can be exercised only at maturity are cal
Chapter 6 Extra Questions
9. The yield to maturity of a $1000 bond with a 7% coupon rate, semi-annual coupons, and two
years to maturity is 7.6% APR, compounded semi-annually. What must its price be?
9.Plan: Given the yield, we can compute the price using
Chapter 3 Extra Questions
14. Consider the following alternatives:
i.
$100 received in one year
ii.
$200 received in 5 years
iii.
$300 received in 10 years
a. Rank the alternatives from most valuable to least valuable if the interest rate is 10% per
year.
Chapter 10 Extra Questions
5. Heavy Metal Corporation is expected to generate the following free cash flows over the next five
years:
Year
1
2
3
4
5
FCF ($ million)
53
68
78
75
82
After then, the free cash flows are expected to grow at the industry averag
Chapter 7 Extra Questions
6. Achi Corp. has preferred stock with annual dividend of $3. If the required return on Achis
preferred stock is 8%, what is its price? (Hint: For a preferred stock, the dividend growth rate is
zero.)
6.Plan:Wecanusetheconstantdi
Chapter 5 Extra Questions
5. You have found three investment choices for a one-year deposit: 10% APR compounded
monthly, 10% APR compounded annually, and 9% APR compounded daily. Compute the EAR for
each investment choice. (Assume that there are 365 days
Lecture 9
Accounting for
Income Tax (Part 1)
Current Tax
Readings
AIFRS, Ch7, pp. 227-239
IAS 12, Income Taxes, paras 5-6, 12-14,
34, 46, 58, 71, & 77
Revise Revaluation model (IAS 16)
from Topic 8
NOTE: In Accounting 250 we do not
cover tax rate changes