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# Compute and explain YTM of bonds, project's APV, after tax WACC, gain on merger

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1. What is the expected YTM on a bond that pays a \$15 coupon annually, has a \$1,000 par value, and matures in six years if the current price of the bond is \$978?

2. A project costs \$14.7 million is expected to produce cash flows of \$4 million a year for 15 years. The opportunity cost of capital is 20%. If the firm has to issue stock to undertake the project and issue costs are \$1 million, what is the project's APV?

3. A firm has a total value of \$1 millin and debt valued at \$400,000. What is the after-tax weighted average cost of capital if the after-tax cost of debt is 12% and the cost of equity is 15%?

4. What is the adjusted present value of a project with a NPV = \$15 million, a bond issue cost of \$2 million and a stock issue cost of \$1 million?

5. Firm A has a value of \$100 million, and B has a value of \$70 million. Merging the two would allow a cost savings with a present value of \$20 million. Firm A purchases B for \$75 million. What is the gain form this merger?

6. The XYZ Corporation with a book value of \$20 million and a market value of \$30 million has been bought by the CDF Corporation witj a book value of \$6 million and a market value of \$8 million. If the purchase price is \$26 million what is the goodwill?

7. Firm A (1.0 million shares outstanding) purchases Firm B with 0.5 million new shares. Value of Firm B is \$70 million and the combined firm is worth \$250 million. What is the true cost of the merger?

8. A project has the following cash flows: C0=-100,000; C1=50,000; C2=150,000; C3=100,000. If the discount rate changes from 12% to 13%, what is the change in the NPV of the project (approximately)?