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Lease, cost of stock, dividend yield, yield on a bond

1. You are leasing a machine for your business. It will cost the lessor $15,000 to be carried for a 6 year. lease term, and you will be putting down 40.00%. What will the annual rental charge be to you if the lessor pays 15% and must earn profits and risk of 5% on the deal?

2. A preferred stock issue was sold 2 years ago by your firm for a price of $25.00. The current market price of preferred issue is $17.00. The stock has a par value of $25.00 and a coupon rate stated at 5.00%. What is the cost of the issue (kps). What was the cost when it was issued, if you paid $4.00 per share in flotation costs?

3. A common stock issue is selling currently for $60.00. Net income amounts to 2,200,000, there are 300,000 shares outstanding. What would the dividend yield on the stock be at the following payout rates?
a) 40%
b) 20%

4. What maximum risk can you sustain if you invest in the following project?
Year 0 $875,000 Cost
1 $228,000 Returns
2 $196,000 "
3 $190,000 "
4 $275,000 "
5 $350,000 "

Money costs you 6.00%
Profits Desired is 4.00%

5. A bond has a 7.50% coupon rate, maturing 4 years from now. To buy this bond, you must invest $1.025 today. What will your return on investment (yield) be?


Solution Summary

Answers questions dealing with Lease- annual rental, cost of preferred stock, dividend yield on the stock at different payout ratios, return on a project, yield on a bond