12/8/12
Chapter:
Problem:
28
3
The following inventory data have been established for the Alder Corporation:
(1) Orders must be placed in multiples of 100 units.
(2) Annual sales are 338,000 units.
(3) The purchase price per unit is $3.
(4) Carrying cost

Solution
Chapter:
Problem:
12/8/2012
26
9
Bradford Services Inc. (BSI) is considering a project that has a cost of $10 million and an expected life of 3
years. There is a 30 percent probability of good conditions, in which case the project will provide a

A
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Solution
Chapter:
Problem:
B
C
D
E
F
G
H
I
12/8/2012
27
11
Malone Feed and Supply Company buys on terms of 1/10, net 30, but it has n

12/8/2012
Chapter:
Problem:
24
5
Duchon Industries had the following balance sheet at the time it defaulted on its interest payments and filed
for liquidation under Chapter 7. Sale of the fixed assets, which were pledged as collateral to the mortgage
bond

Solution
Chapter:
Problem:
12/8/2012
23
6
F. Pierce Products Inc. is financing a new manufacturing facility with the issue in March of
$20,000,000 of 20-year bonds with semiannual interest payments. It is now October, and if Pierce
were to issue the bonds

12/8/2012
Chapter:
Problem:
21
14
Kasperov Corporation has an unlevered cost of equity of 12% and is taxed at a 40% rate. The 4-year forecasts of
free cash flow and interest expenses are shown below. Free cash flow and interest expenses are expected to gr

12/8/2012
Chapter:
Problem:
21
13
Higgs Bassoon Corporation is a custom manufacturer of bassoons and other wind
instruments. Its current value of operations, which is also its value of debt plus equity, is
estimated to be $200 million. Higgs has $110 mill

A
B
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C
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I
12/8/2012
Chapter:
Problem:
20
9
Maggie's Magazines (MM) has straight nonconvertible bond that currently yield 9%. MM's stock sells for $22 per share,
has an expecte

A
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Chapter:
Problem:
B
C
D
E
F
G
H
18
8
Schumann Shoe Manufacturer is considering whether or not to refund a $70 million, 10% coupon, 30-year bond issue that was s

12/8/2012
Chapter:
Problem:
15
12
Reacher Technology has consulted with investment bankers and determined the interest rate it
would pay for different capital structures, as shown below. Data for the risk-free rate, the
market risk premium, an estimate of

12/8/2012
Chapter:
Problem:
16
18
Rusty Spears, CEO of Rustys Renovations, a custom building and repair company, is preparing
documentation for a line of credit request from his commercial banker. Among the required
documents is a detailed sales forecast

Chapter:
Problem:
12
10
Start with the partial model in the file Ch12 P10 Build a Model.xls on the textbooks Web site, which contains the
2013 financial statements of Zieber Corporation. Forecast Zeiber's 2014 income statement and balance sheets. Use
the

Solution
Chapter:
Problem:
12/8/2012
14
13
J. Clark Inc. (JCI), a manufacturer and distributer of sports equipment, has grown until it has become a stable, mature company.
Now JCI is planning its first distribution to shareholders. Shown below are the mos

12/7/2012
Chapter:
Problem:
10
23
Gardial Fisheries is considering two mutually exclusive investments. The projects' expected net cash
flows are as follows:
Time
0
1
2
3
4
5
6
7
Expected Net Cash Flows
Project A Project B
($375)
($575)
($300)
$190
($200)

12/7/2012
Chapter:
Problem:
11
18
Webmasters.com has developed a powerful new server that would be used for corporations Internet activities. It
would cost $10 million at Year 0 to buy the equipment necessary to manufacture the server. The project would
r

A
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B
Chapter:
Problem:
C
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E
F
G
H
I
J
12/7/2012
8
8
You have been given the following information on a call option on the stock of Puckett Industries:
P=
$65
t=
s=
0.5
50.00%

A
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B
Chapter:
Problem:
C
D
E
F
G
H
12/7/2012
7
22
Hamilton Landscaping's dividend growth rate is expected to be 30% in the next year, drop to 15% from Year
1 to Year 2, and drop to a constant 5% for Year 2 and all subsequent year

12/7/2012
Chapter:
Problem:
6
15
a. Use the data given to calculate annual returns for Goodman, Landry, and the Market Index, and then
calculate average returns over the five-year period. (Hint: Remember, returns are calculated by
subtracting the beginnin

3/27/2012
Chapter:
Problem:
5
24
A 20-year, 8% semiannual coupon bond with a par value of $1,000 may be called in 5 years at a call price of
$1,040. The bond sells for $1,100. (Assume that the bond has just been issued.)
Basic Input Data:
Years to maturit

12/7/2012
Chapter:
Problem:
4
35
a. Find the FV of $1,000 invested to earn 10% annually 5 years from now. Answer this
question by using a math formula and also by using the Excel function wizard.
Inputs:
Formula:
Wizard (FV):
PV =
I/YR =
N =
FV = PV(1+I)^

12/7/2012
Chapter:
Problem:
2
15
a. Using the financial statements shown below, calculate net operating working capital, total net
operating capital, net operating profit after taxes, free cash flow, and return on invested capital for
the most recent year

12/7/2012
Chapter:
Problem:
2
14
a. Cumberland Industries' most recent sales were $455,000,000; operating costs (excluding depreciation)
were equal to 85% of sales; net fixed assets were $67,000,000; depreciation amounted to 10% of net fixed
assets; inter