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NPV calculations, IRR, yield to maturity

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Question 1. Jay Coleman just graduated. He plans to work for five years and then leave for the Australian "Outback" country. He figures that he can save $3,500 a year for the first three years and $5,000 a year for the next two years. These savings will start one year from now. In addition, his family gave him a $2,500 graduation gift. If he puts the gift, and the future savings when they start, into an account that pays 7.75% compounded annually, what will his financial "stake" be when he leaves for Australia five years from now? Round off to the nearest $1.

Question 2. Find the present vale of the following stream of cash flows assuming that the firm's cost is 14% and that these amounts are received at the end of each year.
Year Amount
1 - 5 $20,000/yr
6 - 10 $35,000/yr

Question 3.
Table 1
Jones Company Financial Information
December 2008 December 2009
Net income $1,500 $3,000
Accounts receivable 750 750
Accumulated depreciation 1,125 1,500
Common stock 4,500 5,250
Paid-in capital 7,500 8,250
Retained earnings 1,500 2,250
Accounts payable 750 750
Based on the information in Table 1, calculate the after tax cash flow from operations for 2009 (no assets were disposed of during the year, and there was no change in interest payable or taxes payable)

Question 4.
Below are the expected after-tax cash flows for Projects Y and Z. Both projects have an initial cash outlay of $20,000 and a required rate of return of 17%.
Project Y Project Z
Year 1 $12,000 $10,000
Year 2 $8,000 $10,000
Year 3 $6,000 0
Year 4 $2,000 0
Year 5 $2,000 0
Project Y's IRR is:

Question 5.
Wright's Warehouse has the following projections for Year 1 of a capital budgeting project.
Year 1 Incremental Projections:
Sales $200,000
Variable Costs $120,000
Fixed Costs $40,000
Depreciation Expense $20,000
Tax Rate 40%
Calculate the operating cash flow for Year 1.

Questions 6.
Lambda Co. has bonds outstanding that mature in 10 years. The bonds have $1,000 par value, pay interest annually at a rate of 9%, and have a current selling price of $1,125. The yield to maturity on the bonds is


Solution Summary

Jay Coleman graduation case
Jones company financials
PV calculation
Project Y IRR
Lambda Company yield to maturity