Ch. 13
Problem 13-25 IRR (LG13-4)
-2-2
Suppose your firm is considering investing in a project with the cash flows shown below, that the required rate of
return on projects of this risk class is 10 percent, and that the maximum allowable payback and disco
FroYoToGo
Six-Month Financial Projection
April
Revenue
Cost of Goods Sold
Gross Margin
Expenses
Bonus
Commission
Kiosk Rental
Marketing
Equipment Repair and Maintenance
Total Expenses
Operating Income
May
$45,000.00
10,125.00
$52,000.00
11,700.00
$34,875.
Given:
Unit Value
Labor costs
Overhead
Old Process
Material cost
Workers
Output
New Process
Material cost
Workers
Output
Find:
Increase in productivity associated with the process improvement
Solution:
MFP (old)
MFP (new)
MFP Increase
$31 /unit
$12 /hr
1.
Ch. 7
Problem 7-9 Bond Quotes (LG7-3)
-2-2
Consider the following three bond quotes: A Treasury note quoted at 96:30, a corporate bond quoted at 102.80, and
a municipal bond quoted at 101.45. If the Treasury and corporate bonds have a par value of $1,000
Ch. 9 Study Guide
Problem 9-1 Investment Return (LG9-1)
-2-2
FedEx Corp. stock ended the previous year at $124.99 per share. It paid a $1.90 per share dividend last year. It
ended last year at $128.29.
If you owned 480 shares of FedEx, what was your dolla
CH 6
Problem 6-5 Unbiased Expectations Theory (LG6-5)
-2-2
Suppose that the current 1-year rate (1-year spot rate) and expected 1-year T-bill rates over the following
three years (i.e., years 2, 3, and 4, respectively) are as follows:
1R1 = 9%, E(2r1) = 1
Problem 8-30 Constant Growth Stock Valuation (LG8-5)
-2-2
Campbell Soup Co. (CPB) paid a $0.812 dividend per share in 2003, which grew to $1.03 in 2006. This growth is
expected to continue.
What is the value of this stock at the beginning of 2007 when the
Chapter 10
Problem 10-16 Required Return (LG10-7)
-2-2
Suppose Universal Forests current stock price is $63.00 and it is likely to pay a $0.67 dividend next year. Since
analysts estimate Universal Forest will have an 8.4 percent growth rate, what is its r
Problem 12-12 Project Cash Flows (LG12-3)
-2-2
You are considering adding a new software title to those published by your highly successful software company. If
you add the new product, it will use capacity on your disk duplicating machines that you had p
Problem 11-22 WACC Weights (LG11-4)
-2-2
WhackAmOle has 4 million shares of common stock outstanding, 3.0 million shares of preferred stock outstanding,
and 95,000 bonds. Assume the common shares are selling for $62 per share, the preferred shares are sel
Loan
Annual Rate
Periods per Year
Period Rate
Never:
60000
0.09326
4
0.023315
0.023315
Total Revenue
Total Expenses
Net Income
Effective Rate
0.082090052
35000
22310
12690
Cash Flows
-4000
200
400
300
Total Cash Flow
Over 3 Years
Keyboard for Sum
-3100
Re
finance
Add
What is Excel?
Columns
Rows
Cells
Range of cells
Worksheet
Sheet Tab
Workbook
Ctrl + Page Up &
Ctrl + Page Down
Ribbons
QAT
Scroll Bars
Formula & Functions
Formula Bar
Name Box
3
7
8
0.05
0.12
0.06
=> Calculations
Data Analysis
Store raw data
Expected Return and SD for 1 stock
State of economy
Recession
Normal
Irrational Exuberance
Estimated Stock A Estimated Stock B
Prob of
Return if State
Return if State
State
Occurs
Occurs
0.25
-0.09
-0.4
0.9
0.11
0.15
0.04
0.8
0.34
Individual Expected Retu
Capital Asset Pricing Model
Cost of Equity=Risk Free Rate+Beta(Market-RiskPremium)
Risk-Free Rate
Yield on the 20 Year US Treasury
Beta
2.78%
0.31725
market Risk Premium
4.50%
Cost of Equity
4.21%
CMG=Chipotle Mexican Grill
Market Model
Returns for the fi
Instructions
Work problems 1 & 7 from Chapter 11
Show your formulas in the cells so that I can click on the cell
and see how you got the value. If only the value is shown,
no credit will be given.
Possible Earned
10
0
20
0
Problem #1
Problem #7a
Total
30
Given:
Daily Credit Sales
DSO (average collection period)
$50,000 per day
30
Find:
a. Average Accounts Receivable
b. r
?
?
Solution:
a. Average Accounts Receivable
b. r
new receivables acct. balance
amount reduced
$1,500,000
$50,000
$1,000,000
$500,000
10
Given
PV
r
n
Find
FV
Solution
FV
($700)
4%
4 years
$818.90
Given
PV
r
n
Find
FV
Solution
FV
($2,500)
6%
15 years
$ 5,991.40
Given:
PV
n
r
Find:
FV
FV
FV
Solution:
Annually
Quarterly
Monthly
($500)
20 Years
12%
Compounds
1 times per year
4 times per year
1
Given:
N
29 years
r
12.803% compounded
PV
($8,054)
PMT
0
FV
?
Find:
FV
?
Solution:
FV
$311,331.19
4 times per year
Fiona plans to invest $8054 later today. To what amount will her investment grow to in 29
years if she earns 12.803% interest compounded qua
You have just noticed in the financial pages of the local newspaper that you can buy a bond ($1,000 par). If the coupon rate
what should the purchase be valued at if your required return on investments of this type is 7.4 percent?
Given:
coupon
2.70%
n
21