Solution to Minicase for Chapter 9
The following spreadsheet presents the basecase analysis for the mining project. Inflation is
assumed to be 3.5%, but most costs increase in line with inflation. Thus, we deal with real quantities
in the spreadsheet, an
Practice Problems (Risk and Return, CML and SML)
Problem 1: (Parts a, b and c are independent. No information from one should be
assumed for the other.)
a) Suppose there are three types of people in an economy, type A's, B's and C's.
There are also three
1
Valuing Bonds
FM/ IBF
Athar Iqbal
1. A 5year bond with a coupon rate of 4% has a face value of $1000. What is the annual
interest payment?
2. A 3year bond with 10% coupon rate and $1000 face value yield to maturity is 8% .
Assuming annual coupon payme
Solution to Minicase for Cost of Capital
Bernice needs to explain to her boss, Mr. Brinestone, that appropriate rates of return for
cost of capital calculations are the rates of return that investors can earn on comparable
risk investments in the capital
Chapter 007 Net Present Value and Other Investment Criteria
True / False Questions
1. As the opportunity cost of capital decreases, the net present value of a project increases.
TRUE
2. The IRR is the rate of return on the cash flows of the investment, al
CHAPTER 6
BONDS AND THEIR VALUATION
OVERVIEW
This chapter presents a discussion of the key
characteristics of bonds, and then uses time
value of money concepts to determine bond
values. Bonds are one of the most important
types of securities to investors,
GUIDE LINES FOR THE TERM PROJECT (Finance for Managers/IBF)
Initial submission date for IBF STUDENTS: 26 for Friday and 27th for Saturday
session.
The term report which will have to submit towards the end of semester must follow the
below mentioned criter
BOND VALUATION
The financial value of any asset, be it a security, real estate, business, etc., is the
present value of all future cash flows. The easiest thing to value (conceptually) is a bond since
the promised cash flows are known with certainty.
Cons
Chapter 6, Solutions
Cornett, Adair, and Nofsinger
CHAPTER 6 Valuing Bonds
Questions
LG1 1. What does a call provision allow the issuer to do, and why would they do it?
A call provision on a bond issue allows the issuer to pay off the bond debt early at a
Bonds and Their Valuation
After reading this chapter, students should be able to:
List
the
four
main
classifications
differentiate among them.
Identify the key characteristics common to all bonds.
Calculate the value of a bond with annual or semiannual
in
BOND PROBLEM SOLUTIONS
1. Six years ago, The Corzine Company sold a 20year bond issue with a 14 percent annual
coupon rate and a 9 percent call premium. Today, Corzine called the bonds. The bonds
originally were sold at their face value of $1,000. Comput
CHAPTER 5
INTEREST RATES AND BOND
VALUATION
Answers to Concept Questions
1.
No. As interest rates fluctuate, the value of a Treasury security will fluctuate. Longterm Treasury
securities have substantial interest rate risk.
2.
All else the same, the Trea
REVIEW OF CAPITAL BUDGETING
Fabricate Ltd. is a medium sized company manufacturing metal fabrications. It had recently spent
80,000 on research into a new product and now was ready to invest in the project if the financial
analysis supported such an actio
Solution to Minicase for Chapter 12
Bernice needs to explain to her boss, Mr. Brinestone, that appropriate rates of return for
cost of capital calculations are the rates of return that investors can earn on comparable
risk investments in the capital marke
How to Answer
The 64 Toughest
Interview
Questions
THIS BOOK IS DESIGNED TO PROVIDE ACCURATE INFORMATION ON THE
SUBJECTS COVERED. HOWEVER, IT IS DONE WITH THE UNDERSTANDING THAT
THE PUBLISHER IS NOT ENGAGED IN RENDERING LEGAL, ACCOUNTING OR
PROFESSIONAL SE
CHAPTER 7
NET PRESENT VALUE AND OTHER
INVESTMENT CRITERIA
Answers to Concept Questions
1.
Assuming conventional cash flows, a payback period less than the projects life means that the NPV is
positive for a zero discount rate, but nothing more definitive c
Chapter 9 Net Present Value and Other Investment Criteria
Chapter 09 Quiz A Student Name _
Student ID _
Use the following information to answer questions 1 through 5.
You are analyzing a proposed project and have compiled the following information:
Year
C
B144 SOLUTIONS
CHAPTER 9
NET PRESENT VALUE AND OTHER
INVESTMENT CRITERIA
Answers to Concepts Review and Critical Thinking Questions
1.
A payback period less than the projects life means that the NPV is positive for a zero discount rate,
but nothing more
BUS 365: Investments
Practice Problems
Risk and Return
1) For this question, please assume that markets are efficient. BRIEFLY answer the following.
Suppose that a riskaverse investor wants to form a welldiversified portfolio of ten stocks.
How might th
CHAPTER 3
RISK AND RETURN
OVERVIEW
Risk is an important concept in financial
analysis, especially in terms of how it affects
security prices and rates of return. Invest ment risk is associated with the probability
of low or negative future returns.
The ri
Problem Set 4
International Finance
Shrikhande
Fall 2006
A. International Cost of Capital
1.
A firm with a corporatewide debt/equity ratio of 1:2, an after tax cost of debt of 7%, and a cost of equity
capital of 15% is interested in pursuing a foreign p
ANSWERS TO CONCEPT QUESTIONS, PROBLEMS AND QUESTIONS, AND CASES
CONCEPT QUESTIONS
Concept Check 111 (p. 293)
1. Why should an investor develop specific investment goals?
The goal setting process is important because it forces investors to consider what t
Chapter 9, Solutions
Cornett, Adair, and Nofsinger
CHAPTER 9 CHARACTERIZING RISK AND RETURN
Questions
LG1
1. Why is the percentage return a more useful measure than the dollar return?
The dollar return is most important relative to the amount invested. Th
Ch 9 NPV and other Investment Criteria
1. How do we determine if a project is worthwhile?
Example: Gillette spent $1B to develop the Mach3. What
happens to this project is a function of many variables:

Price per unit
Cost per unit
Unit demand
Distribu
INTERNATIONAL MANAGEMENT (MGT 4478)
SYLLABUS FALL 2008
2:30PM (TTH) GAB 301
INSTRUCTOR
Dr. Aaron Caillouet
Office: 203 Bibb Graves Hall
Office Hours: Wednesday (85)
Telephone: 3346703156
Email: aaron@troy.edu
ABOUT THE INSTRUCTOR
Fulltime faculty m