Compute annual interest payment,required rate of return, NPV
1. A corporate bond has a coupon rate of 12%, a yield to maturity of 10.55%, a face value of $1,000, and a market price of $850. Therefore, the annual interest payment is:
Answer is A) 101.75 B) 102 C) 105.50 D) 120.00
2. Johnstown Supply Corporation stock is currently selling for $58.00. It is expected to pay a dividend of $5.00 at the end of the year. Dividends are expected to grow at a constant rate of 7.5% indefinitely. Compute the required rate of return on Johnstown Supply Corporation stock.
Answer A) 12.48% B) 15.65% C) 13.64% D) 16,12%
3. Burns and Nuble is considering an investment in a project which would require an initial outlay of $350,000 and produce expected cash flows in years 1-5 of $95,450 per year. You have determined that the current after-tax cost of the firm's capital (required rate of return) for each source of financing is as follows: Cost of long term debt is 7%, Cost of preferred stock is 11% and cost of common stock is 15%. Long term debt currently makes up 25% of the capital structure, preferred stock 15%, and common stock 60%. What is the net present value of this project?
Answer A) -9,306 B)2,149 C 5,983 D) 11,568
Solution Preview
1 - Annual interest payment is based on coupon rate.
Annual Interest = 12% of 1000 = ...
Solution Summary
The solution computes annual interest payment, required rate of return, NPV of project
... $30,000).00000000 (6,000) Bonds: Interest paid ($3,000 X ... water slides, Otthar estimates that annual incremental operating ... 2. Compute the simple rate of return...
... goal of a publicly-owned firm interested in serving ... end of its 4 year life, compute the after ... 82 The semi-annual interest payments that corporate bonds in the ...
... to calculate the present value Semi annual interest 30 Periods ...annual Discounting rate 4% semi annual Par value ... in a complete small business computer system. ...
... If Robb Computer applies the NPV dec (Round answers to 2 decimal ... If interest rates ill be priced at $ 1,221.37____ and $812.05 , respectively. ...Annual Annual. ...
... provided in the following table: Annual After-tax ... a. Compute the predetermined overhead rate that would ... than sales d. Interest revenue, interest expense, and ...
... basis, for instance, use the annual interest rate divided by ... Only where interest rates were assumed to be 0 (an ... two competing investments in computer equipment ...
...Annual Cash Flows $5,000 Less: Depreciation $3,750 Net ... a. Compute the predetermined overhead rate that would be ... D)Interest revenue, interest expense and income ...
... and uses the following compound interest table ... Blue Capital investment $400,000 $560,000 Annual net income ... Depreciation is computed by the straight-line method ...