Shady rack inc. | Business & Finance homework help

Question 1

 

How much did you borrow for your house if your monthly mortgage payment for a 30 year mortgage at 6.65% APR is $1,700?

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A.

$249,235

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B.

$218,080

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C.

$264,812

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D.

$202,503

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E.

$233,658

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F.

$186,926

6 points  

Question 2

 

Shady Rack Inc. has a bond outstanding with 10 percent coupon, paid semiannually, and 15 years to maturity. The market price of the bond is $1,039.55. Calculate the bond’s yield to maturity (YTM). Now, if due to changes in market conditions, the market required YTM suddenly increases by 2% from your calculated YTM, what will be the percent change in the market price of the bond?

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A.

-17.76%

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B.

-15.66%

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C.

-14.01%

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D.

-14.87%

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E.

-16.39%

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F.

-17.09%

6 points  

Question 3

 

Sanaponic, Inc. will pay a dividend of $6 for each of the next 3 years, $8 for each of the years 4-7, and $10 for the years 8-10.  Thereafter, starting in year 11, the company will pay a constant dividend of $8/year forever.  If you require 18 percent rate of return on investments in this risk class, how much is this stock worth to you?

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A.

$37.77

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B.

$55.99

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C.

$45.68

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D.

$50.50

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E.

$41.46

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F.

$34.54

6 points  

Question 4

 

Your required rate of return is 12%. What is the net present value of a project with the following cash flows?
 

Year

0

1

2

3

4

5

Cash Flow

-750

450

350

150

125

-100

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A.

15.56

 

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B.

48.68

 

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C.

26.33

 

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D.

60.27

 

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E.

72.15

 

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F.

37.37

 

                   

6 points  

Question 5

 

Please use the following information for this and the following two questions.

BB Lean has identified two mutually exclusive projects with the following cash flows.
 

Year

0

1

2

3

4

5

Cash Flow Project A

-52,000.00

18,000.00

17,000.00

15,000.00

12,000.00

9,000.00

Cash Flow Project B

-52,000.00

17,800.00

10,000.00

12,000.00

17,000.00

22,000.00

 

The company requires a 11.5% rate of return from projects of this risk.
 
What is the NPV of project A?

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A.

972.57

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B.

5,972.87

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C.

417.37

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D.

1,395.64

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E.

1,624.90

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F.

5,180.35

6 points  

Question 6

 

What is the IRR of project B?

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A.

12.06%

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B.

14.68%

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C.

13.90%

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D.

13.05%

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E.

12.94%

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F.

20.80%

6 points  

Question 7

 

At what discount rate would you be indifferent between these two projects?

[removed]

A.

13.5250%

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B.

14.7386%

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C.

34.1306%

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D.

15.8950%

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E.

3.1177%

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F.

26.0812%

6 points  

Question 8

 

A bond with a face value of $1,000 has annual coupon payments of $100. It was issued 10 years ago and has 7 years remaining to maturity. The current market price for the bond is $1,000. Which of the following is true: I. Its YTM is 10%. II. Bond’s coupon rate is 10%. III. The bond’s current yield is 10%.

[removed]

A.

III  Only

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B.

I, II, and III

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C.

I, III  Only

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D.

II, III  Only

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E.

I  Only

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F.

I, II  Only

6 points  

Question 9

 

Riverhawk Corporation has a bond outstanding with a market price of $1,050.00.  The bond has 10 years to maturity, pays interest semiannually, and has a yield to maturity of 9%.  What is the bond’s coupon rate?

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A.

12.84%

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B.

9.77%

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C.

10.54%

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D.

12.08%

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E.

11.31%

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F.

13.61%

6 points  

Question 10

 

You purchased a stock for $24 per share. The most recent dividend was $2.50 and dividends are expected to grow at a rate of 8% indefinitely. What is your required rate of return on the stock?

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A.

17.00%

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B.

17.64%

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C.

18.38%

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D.

21.50%

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E.

20.27%

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F.

19.25%

6 points  

Question 11

 

Sales and profits of Growth Inc. are expected to grow at a rate of 25% per year for the next six years but the company will pay no dividends and reinvest all earnings. After that, the dividends will grow at a constant annual rate of 7%. At the end of year 7, the company plans to pay its first dividend of $4.00 per share. If the required return is 16%, how much is the stock worth today?

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A.

$22.80

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B.

$15.96

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C.

$13.68

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D.

$25.08

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E.

$18.24

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F.

$20.52

6 points  

Question 12

 

Apple Sink Inc. (ASI) just paid a dividend of $2.50 per share.  Its dividends are expected to grow at 26% a year for the next two years, 24% a year for the years 3 and 4, 16% for year 5, and at a constant rate of 6% per year thereafter.  What is the current market value of the ASI’s stock if companies in this risk class have a 16% required rate of return?

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A.

$54.27

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B.

$56.03

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C.

$45.54

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D.

$42.87

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E.

$51.29

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F.

$48.35

6 points  

Question 13

 

The Retarded Company’s dividends are declining at an annual rate of 4 percent.  The company just paid a dividend of $4 per share.  You require a 16 percent rate of return.  How much will you pay for this stock?

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A.

$13.85

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B.

$19.20

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C.

$15.33

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D.

$17.09

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E.

$21.78

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F.

$12.57

6 points  

Question 14

 

The dividend yield of a stock is 10 percent. If the market price of the stock is $18 per share and its dividends have been growing at a constant rate of 6%, what was the most recent dividend paid by the company?

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A.

$1.53

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B.

$0.85

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C.

$1.70

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D.

$1.02

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E.

$1.19

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F.

$1.36

6 points  

Question 15

 

Last year, Jen and Berry Inc. had sales of $40,000, cost of goods sold (COGS) of 12,000, depreciation charge of $3,000 and selling, general and administrative (SG&A) cost of $10,000. The interest costs were $2,500. Thirty-five percent of SG&A costs are fixed costs. If its sales are expected to be $60,000 this year, what will be the estimated SG&A costs this year?

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A.

$12,667

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B.

$11,500

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C.

$10,636

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D.

$12,000

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E.

$13,250

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F.

$14,250

6 points  

Question 16

 

You require a risk premium of 3.5 percent on an investment in a company. The pure rate of interest in the market is 2.5 percent and the inflation premium is 3 percent.  US Treasury bills are risk free. What should be the yield of the US Treasury bills? Use multiplicative form.

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A.

6.35%

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B.

6.09%

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C.

5.58%

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D.

5.06%

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E.

5.32%

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F.

5.83%

6 points  

Question 17

 

Bonds X and Y are identical, including the risk class. The only difference between A and B is in the coupon payment as shown below.
 

 

Bond X

Bond Y

Face value

$1,000

$1,000

Annual Coupon Payment

$120

$130

Payment Frequency

Semiannual

Annual

Years to maturity

15

15

Price

$950.39

?

 
                What is the price of bond Y?

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A.

$1,007.15

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B.

$925.88

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C.

$989.75

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D.

$956.95

[removed]

E.

$940.92

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F.

$973.44

 

 

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