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1. Calculating Investment Returns
You bought one of Great White Shark Repellant Co.’s 9 percent coupon bonds one year ago for $790. These bonds make annual payments and mature 8 years from now. Suppose you decide to sell your bonds today, when the required return on the bonds is 13 percent. If the inflation rate was 3.7 percent over the past year, what was your total real return on investment?
a.17.88%
b.10.10%
c.9.62%
d.9.72%
e.-1.36%
2. Finding the Target Capital Structure
Fama's Llamas has a weighted average cost of capital of 10.5 percent. The company's cost of equity is 17 percent, and its pretax cost of debt is 8 percent. The tax rate is 34 percent. What is the company's target debt-equity ratio? (Do not round your intermediate calculations.)
a.1.2452
b.1.3075
c.1.183
d.2.6
e.1.295
Find the following values for a lump sum assuming annual compounding: What is the effective annual rate (EAR) if the stated rate is 8 percent and compounding occurs semiannually? Quarterly?
ABC and XYZ are all-equity firms. ABC has 1,750 shares outstanding at a market price of $20 a share. XYZ has 2,500 shares outstanding at a price of $28 a share. XYZ is acquiring ABC for $36,000 in cash. The incremental value of the acquisition is $3,..
You have just invested a one-time amount of $6,000 in a stock-based mutual fund. How much will your investment be worth in 23 years?
Determine the actual purchase and selling price for a Treasury bill quoted at the bid of 5.63 and the ask of 5.62 with 90 days to maturity.
What constant payment for the next 10 years would be equivalent to receiving $650 every other year starting 10 years from now.
Working capital: Winston Electronics reported the following information at its annual meetings. What is the company’s net working capital?
You are going to value Lauryn’s Doll Co. using the FCF model. After consulting various sources, you find that Lauryn has a reported equity beta of 1.5, a debt-to-equity ratio of .4, and a tax rate of 30 percent. Assume her FCF is expected to grow at ..
Given all this, what portfolio should you buy to delta-gamma hedge your portfolio?
Breakeven Analysis: Paul Scott has a 2008 Cadillac that he wants to update with a GPS system so that he will have access to up-to-date road maps and directions. Aftermarket equipment can be fitted for a flat fee of $500, and the service provider requ..
What are in common in the valuation equations for bonds and for common stocks? What are the differences between the valuation equation for bonds and that for common stocks? Why can’t we use the valuation equation for bonds to evaluate the common stoc..
Think of that last problem you just did. What effective annual rate does that convert to?
the machine has a depreciate life of five years and with no salvage savage. the machine.
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