EXTRA PRACTICE PROBLEMS FOR FINAL
1. A 10-year Treasury bond has an 8% coupon, and an 8-year Treasury bond has a 10% coupon. Neither is
callable, and both have the same yield to maturity. If the yield to maturity of both bonds increases by
the same amount
1. Which of the following statements is CORRECT?
8 points
a. The beta of a portfolio of stocks is always smaller than the betas of any of the
individual stocks.
b. If you found a stock with a zero historical beta and held it as the only stock in
your port
1. Which of the following statements is CORRECT?
8 points
a. The beta of a portfolio of stocks is always smaller than the betas of any of the
individual stocks.
b. If you found a stock with a zero historical beta and held it as the only stock in
your port
EXTRA PRACTICE PROBLEMS FOR FINAL
1. A 10-year Treasury bond has an 8% coupon, and an 8-year Treasury bond has a 10% coupon. Neither is
callable, and both have the same yield to maturity. If the yield to maturity of both bonds increases by
the same amount
12/08/11
Table 17.1 Additional Funds Needed (AFN) Model (Millions of Dollars)
Part I. 2012 Data from Chapter 3, Tables 3.1 and 3.2
A0* = Assets at 12/31/12. All assets were needed for 2012 sales
S0 = 2012 Sales
2012 Net Income
2012 Dividends
L0* = 2012 pa
BUS 330b
Homework #2
Niginakhon Tokhirdzhanova
5.11
a. 5N; 6,000,000PV; 0PMT; -12,000,000FV; I/Y=14.869% or 14.87%
b. No, the statement is not correct because of continuing compounding.
5.12
a. 1N; -700PV; 0PMT; 749FV; I/Y=7%
b. the same as a. 1N; 700PV;
Allied's Lemon Juice Project (in Thousands)
End of Year
I. Investment Outlays
Equipment cost
Installation
CAPEX
Increase in inventory
Increase in accounts payable
NOWC
II. Project Operating Cash Flows
Unit sales (thousands)
Price/unit
Total revenues
Opera
BUS330 Corporate Finance I
Ivan Nenov
Mikhail Susin
Niginakhon Tokhirdzhanova
Violeta Petkova
Allied Food Products
Capital Budgeting and Cash Flow Estimation
Integrated Case
a) [Please refer to the Table in the excel file]
1. CAPEX=$-240,000
NOWC=$20,000
6.1
a)
term
6 months
1 year
2 years
3 years
4 years
5 years
10 years
20 years
30 years
Rate
5.10%
5.50%
5.60%
5.70%
5.80%
6.00%
6.10%
6.50%
6.30%
b)
The yield curve is upward slopping.
c)
You will be better off, if you borrow long term because each year t
Chapter 10 problem 10-9
Common equity=
Debt BT=
Marginal TR=
16%
13%
40%
LT debt=
CE=
T otal=
1,152.00
1,728.00
2,880.00
Com. Stock=
Price per share
T otal market value of debt and equity=
WACC=
10.6%
576
$4.00
3,456
problem 10-12
a.)
r(d)=
Dividend=
g
Pr
Problem 1.
Answer: E
Problem 2.
Solution:
We use only the weights and the expected return of Stock A and Stock B.
Expected return on portfolio: wA*r-hat + wB*r-hat
Rp-hat: 15*0,5+15*0,5= 15%.
Problem 3.
Solution:
Required rate of retun: RF+RPm*stock's bet
Figure 13.3. Analysis of a Timing Option (Dollars in Thousands)
Part I. Project without the Timing Option
Cash Flow at End of Period
1
2
3
$2,000
$2,000
$2,000
$450
$450
$450
Expected NPV
Standard Deviation ()
Coefficient of Variation = CV = / Expected NP
Model for Chapter 11, Basics of Capital Budgeting
12/08/11
On tab #1 we go through the main calculations done in the chapter. We recommend that you see our Excel
Tutorial if you don't understand some of the Excel functions.
Table 11.1 Data on Projects S a
State of economy
Recession
Below average
Average
Above average
Boom
r
o
CV
b
P
10.00%
20.00%
40.00%
20.00%
10.00%
T-bill
High tech
5.50% -27.00%
5.50%
-7.00%
5.50%
15.00%
5.50%
30.00%
5.50%
45.00%
5.500% 12.400%
0
20.04%
0
1.62
0
1.32
Collections US rubbe
1E
2
expected return
Stock A
15%
Stock B
15%
r=w(1)*r(1)+w(2)*r(2)
expected return
15.00%
The portfolio's expected return is 15%.
weight
50%
50%
3
5.5%
4.75%
11.75%
1.32
6.75%
14.38%
r(RF)
RPm
r(s)
b
new r(s)
new r(RF)
4
5
B
Semiannual
Periods
Coupon
PV
E