FNCE5101 Homework 1
9-15-14
Chris Meehan
1. During the late 1980s, the money supply grew at a ten percent rate while the price
level grew at a four percent rate and the quantity of output grew at a three percent rate.
Can these results be explained by the
FNCE5101 Homework 9
11-17-14
Chris Meehan
OPTIONS PROBLEMS
1. Walmart offers 30 day rainchecks as a way to attract loyal customers. A
raincheck gives the customer the right to buy a product that is out-of-stock
today. If the customer returns during the ne
FNCE5101 Homework 10
12-1-14
Chris Meehan
Financial Planning and Analysis
Problem 1:
The following data are taken from the annual report of Khalin Drug Stores.
In addition, relevant industry data are provided.
a. Compute the ratios for Khalin correspondin
FNCE5101 Homework 8
11-10-14
Chris Meehan
NPV and CFs
Problem 1:
Which of the following should be considered when calculating the
incremental CFs associated with a new warehouse? Assume the firm
owns the land but that existing buildings would have to be d
FNCE5101 Homework 9
11-17-14
Chris Meehan
OPTIONS PROBLEMS
1. Walmart offers 30 day rainchecks as a way to attract loyal customers. A
raincheck gives the customer the right to buy a product that is out-of-stock
today. If the customer returns during the ne
FNCE5101 Homework 5
10-20-14
Chris Meehan
Cost of Capital
Problem 1:
Calculate the after-tax cost of debt under the following conditions if the
maturity value of the debt is $1,000, interest is paid annually, and the
corporate tax rate is 35 percent.
a. C
FNCE5101 Homework 6
10-27-14
Chris Meehan
Capital Structure
Problem 1:
Assume the Modigliani and Miller (MM) no-tax model holds, A firm
exists that has 20 percent of its capital structure in the form of debt, which
has a cost of 6 percent. Now the firm mo
FNCE5101 Homework 4
10-6-14
Chris Meehan
Risk and Return
Problem 1:
Security A has a mean of 25 and a standard deviation of 15; security B has
a mean of 40 and a standard deviation of 10.
a. Which security is riskier? Why?
b. What if the standard deviatio
FNCE5101 Homework 3
9-29-14
Chris Meehan
Valuation of Bonds and Stocks
Problem 1:
Find the current market price of a 20-year, 9% coupon rate bond with par
value of $1,000, if interest is paid annually and if current market rates are
(a) 11% or (b) 7%. Wha
FNCE5101 Homework 2
9-22-14
Chris Meehan
Time Value Adjustment
Problem 1:
Assume the following series of cash flows:
Time Period
t=1
t=2
t=3
t=4
Amount
$300
$200
$100
$100
Show at least four different ways you could set up the cash flow stream to
solve fo