38. Calculating Loan Payments You need a 30
year, fixed-rate mortgage to buy a new home
for $250,000. Your mortgage bank will lend you
the money at an APR of 4.5 percent for this
360 month loan. However, you can only afford
monthly payments of $950, so yo
17. marginal versus average tax rates Corporation growth has $82,500 in taxable income, and
corporation income has $8,250,000 in taxable income.
a. What is the tax rate for each firm?
7500
6250
2550
16300
b. Suppose both firms have identified a new projec
9. Calculating NPV Howell Petroleum is considering a new project
that compliments its existing business. The machine required for
the project cost $3.9 million. The marketing department predicts
that sales related to the project will be $2.35 million per
7. Stock Valuation Gruber Corp. pays a constant $9 dividend on
its stock. The company will maintain this dividend for the next 13
years and will then cease paying dividends forever. If the required
return on this stock is 9.5 percent, what is the current
22. Portfolio Returns and Deviations Consider the following information about three stocks:
A. If your portfolio is invested 40 percent each in A and B and 20 percent in C, What is the portfolio expected retu
B. If the expected T-bill rate is 3.80 percent
CH 22 Options and Convertibles Computational Problems
#1
a. The value of the call is the stock price minus the present value of the exercise price
C = $63 [$60/1.048] = $5.75
The intrinsic value is the amount by which the stock price exceeds the price of
8. Calculating External Financing Needed (EFN) The most recent financial statements for williamson Inc., are sho
assets and costs are proportional to sales. Debt and equity are not. No dividends are paid. Next year's sales are p
Explanation:
An increase o
CH 22 Options and Corporate Finance
Options: A right, but not an obligation to
do something.
Exercising the option: The act of buying or
selling the underlying assets via the option
contract.
Strike price: Price at which an option can be
exercised. Also c
14. Comparing Investment Criteria Wii
Brothers, a game manufacturer, has a new idea
for an adventure game. It can market the game
either as a traditional board game or as an
interactive DVD, but not both. Consider the
following cash flows of the two mutua
Suppose you invest $7000 in a 5 year CD earning 6% per year.
How much would you have in 5 years?
Rate
Nper
PV
FV
0.06
5
-7000
$9,367.58
How much must I Invest today at 9% to have $10,000
five years from today?
Rate
0.09
Nper
5
FV
10000
PV ($6,499.31)
Bank