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Use the following information for Questions 1 through 5:
Assume that you are nearing graduation and have applied for a job with a local bank. The bank'sevaluation process requires you to take an examination that covers several financial analysis techniques. The first section of the test asks you to address these discounted cash flow analysis problems:
What is the present value of the following uneven cash flow stream -$50, $100, $75, and $50 at the end of Years 0 through 3? The appropriate interest rate is 10%, compounded annually.
We sometimes need to find out how long it will take a sum of money (or something else, such as earnings, population, or prices) to grow to some specified amount. For example, if a company's sales are growing at a rate of 20% per year, how long will it take sales to double?
Will the future value be larger or smaller if we compound an initial amount more often than annually- for example, every 6 months, or semiannually-holding the stated interest rate constant? Why?
What is the effective annual rate (EAR or EFF%) for a nominal rate of 12%, compounded semiannually? Compounded quarterly? Compounded monthly? Compounded daily?
Suppose that on January 1 you deposit $100 in an account that pays a nominal (or quoted) interest rate of 11.33463%, with interest added (compounded) daily. How much will you have in your account on October 1, or 9 months later?
Use the following information for Questions 6 and 7:
A firm issues a 10-year, $1,000 par value bond with a 10% annual coupon and a required rate of return is 10%.
What would be the value of the bond described above if, just after it had been issued, the expected inflation rate rose by 3 percentage points, causing investors to require a 13% return? Would we now have a discount or a premium bond?
What would happen to the bond's value if inflation fell and rd declined to 7%? Would we now have apremium or a discount bond?
What is the yield to maturity on a 10-year, 9% annual coupon, $1,000 par value bond that sells for $887.00? That sells for $1,134.20? What does a bond selling at a discount or at a premium tell youabout the relationship between rd and the bond's coupon rate?
What are the total return, the current yield, and the capital gains yield for the discount bond in Question #8 at $887.00? At $1,134.20? (Assume the bond is held to maturity and the company does not default on the bond.)
The Capital Corporation is planning to spend $1,000,000 on expansion. It's WACC is estimated at 13%. Operating cash flows for years 1-4 are estimated at $300,000, followed by $350,000 for the next 4 years.
The pecking order states how financing should be increased. In order to avoid asymmetric information problems and misinterpretation of whether management is sending a signal on security overvaluation the company's first rule is to:
finding the transfer price in different situations.harpoon inc. is a u.s. multinational corporation that ships small
If there has been a 10% increase in consumer income between two periods, determine the percentage change in the demand for foreign travel?
Benkart's Tire Store has fixed costs of $220,000. Tires sell for $95 each and have a unit variable cost of $45. What is Benkart's break-even point in units.
Define the Net present Value (NPV) method in capital budgeting and state the NPV decision rule. In economic terms, what does the NPV amount represent?
After recording bad debts expense, what is the final balance in the allowance for doubtful accounts?
ricky spends 103.19 in additional interest and charges on monthly payments as the result of the prior bankrupsy if
Explain the importance of diversification in the context of controlling operating exposure.
Suppose Miles is considering investing cash on hand in a new investment that will increase the volatility of its assets by 10%. What is the minimum NPV such that this investment will increase the value of Miles’ shares?
you and your friends are thinking about starting a motorcycle company named apple valley choppers. your initial
United Pigpen is considering a proposal to manufacture high-protein hog feed.
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