Chapter 4.
a. Find the FV of $1,000 invested to earn 10% annually 5 years from now. Answer this question by using
a math formula and also by using the Excel function wizard.
Inputs:
Formula:
Wizard (FV):
PV =
I/YR =
N =
FV = PV(1+I)^N =
1000
10%
5
($1,610
3. Langley Enterprises pays a constant dividend of $1.40 a share. The company announced today that it will
continue to do this for another 2 years after which time it will discontinue paying dividends permanently. What is
one share of this stock worth tod
1. Rolston Corporation is comparing two different capital structures, an all-equity plan (Plan I) and a levered plan (Plan II). Under Plan I,
Rolston would have 200,000 shares of stock outstanding. Under Plan II, there would be 150,000 shares of stock out
Hughes Co. is growing quickly. Dividends are expected to grow at a rate of 26 percent for the next three
years, with the growth rate falling off to a constant 6 percent thereafter. If the required return is 12 percent and
the company just paid a $1.90 div
Problem
A
5 years Straight Line Depreciation
New Cars generated 190000 before EBITDA
Financed by Equity 38%
Required Return is 10%
PVIFA 13%,5
0=-P+(1-0.35)*(140000)*(3.5172)+(.35)*(P/5)*(3.5172)
1st
2nd
3rd
P=
5
$190,000
35%
14%
3.4330809689
$423,985.50
Bethseda Mining Company
Answers:
NPV =
IRR =
MIRR =
Payback Period (in years)=
Profitability Index=
Should Bethesda take the project?
Part 1. Input Data (in thousands of dollars)
Project life
Opportunity Cost (after tax)
Equipment Investment
Contract call
Homework 8
1. The Dybvig Corporations common stock has a beta of 1.4. If the risk-free rate is 4.5 percent and the expected return on
the market is 11 percent, what is Dybvigs cost of equity capital?
Stock Beta
Risk-free rate
Expected return on market
1.4
Eaton
Chapter 6
Webmasters.com has developed a powerful new server that would be used for corporations Internet activities. It would cost
$10 million at Year 0 to buy the equipment necessary to manufacture the server. The project would require net working
Chapter 5 NPV and Other Investment Rules
Gardial Fisheries is considering two mutually exclusive investments (if one is selected the other is eliminated). The projects' expected net cash flows are
as follows:
Time
0
1
2
3
4
5
6
7
Expected Net Cash Flows
P
A
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
B
C
D
E
F
H
I
K
Taussig Technologies Corporation (TTC) has been growing at a rate of 20% per year in recent years. This same growth rate is
expected to last for another 2 years (g 1 = g2 = 2
Goodweek Tires, INC.
Research and Development Cost
Test Marketing Cost
$10,000,000
$5,000,000
Initial Investment
Equipment sold in 4 years at
Working Capital
Net Working Capital Requirement
$160,000,000
$65,000,000
$9,000,000
15% of sales
Original Equipme
Session 8 Template
a. Use the data given to calculate annual returns for Bartman, Reynolds, and the Market Index, and then calculate
average returns over the five-year period. (Hint: Remember, returns are calculated by subtracting the beginning
price from
Dividend Chapter
Buena Terra Corporation is reviewing its capital budget for the upcoming year. It has paid a $3.00 dividend per
share (DPS) for the past several years, and its shareholders expect the dividend to remain constant for the next
several years