Determinants of Interest Rates for Individual Securities. A particular
securitys risk premium is 2 percent. For all securities, the inflation risk premium is 1.75
percent and the real risk-free rate is 3.5 percent. The securitys liquidity risk premium
Investment Return FedEx Corp. stock ended the previous year at $103.39 per
share. It paid a $0.35 per share dividend last year. It ended last year at $106.69. If you
owned 200 shares of FedEx, what was your dollar return and percent return? (LG9-1)
Multiyear Future Value: How much would be in your savings account in 11 years
after depositing $150 today if the bank pays 8 percent per year? (LG4-3)
FVN=PV (1+I) N
= $150 2.3316
Compounding with Different Interest
2-1 Balance Sheet You are evaluating the balance sheet for Goodmans Bees
Corporation. From the balance sheet you find the following balances: cash and
marketable securities = $400,000, accounts receivable = $1,200,000, inventory =
$2,100,000, accrued wage
3-2 Liquidity Ratios The top part of Ramakrishnan, Inc.s, 2015 and 2014 balance
sheets is listed below (in millions of dollars).
Calculate Ramakrishnan, Inc.s, current ratio, quick ratio, and cash ratio for 2015 and
2-1. Goodmans Bees Corporation had $3.7 million in current assets and $1.9 million in current
liabilities. The net working capital would be $1.8 million for Goodmans Bees.
2-4. The Fitness Studio, Inc. would see an increase of $4.39 in earnings per share.
13-1. The NPV for Project M is $657.47 and the project would be accepted because the NPV is
13-2. The NPV for Project Y is -$404.10 and the project would be rejected because the NPV is
13-3. The NPV for Project U is $293.45 and the
11-1. Diddy Corp.s cost of equity is 15.20%.
11-3. Oberons before-tax component cost of debt is 8.71%.
11-5. LilyMac Photographys tax rate would be 39%.
11-7. ILKs component cost of preferred stock is 8.25%.
11-9. FarCry Industries is going to have a WACC
6-1. The securitys equilibrium rate of return is 8.35%.
6-2. The inflation premium is .50% and the fair interest rate on Moore Corporation 30-year
bonds is 4.65%.
6-5. The current (long-term) rates for 1,2,3, and 4 year maturity are as follows 6%, 6.50%,
9-1. The dollar return for the 200 shares was $730 and the percent return was 3.53%.
9-2. The dollar return for the 500 shares was -$1050 and the percent return was -8.99%.
9-7. The best to worst risk-return relationship is Rail Haul with 2.08, Poker-R-Us
4-5. The future value of the savings account after 11 years at a rate of 8 percent would be
4-7. In the first year it will gain $28 in interest. In the second year it will gain $22.68. In the third
year it will gain $22.04. This will create a fut
3-2. Ramarkrishan, Incs current ratio for 2014 was 1.9641 times and 1.9429 times in 2015. Their
quick ratio for 2014 was 0.9076 times and 0.8742 times in 2015. Their cash ratio for 2014 was
0.1743 times and 0.1428 times in 2015.
3-3. Tater and Pepper Corp