1) GenCo at 12/31/16 had $130 in long term debt, $10 in short term debt, $15 in preferred stock and $150 in common equity.
a. Calculate its financial leverage. (% to 1 place)
b. If GenCo had $17 in net income for 2016, what was its ROE? (% to 1 place)
2) If you expect to receive $100 in 3 years and can reliably earn 5% after tax on your investments, what is the value of the $100 to you today?
3) TechCo issued bonds, each with a face value of $1,000, and with a coupon rate of 6%/year paid semiannually. If there is exactly 7 years to maturity, and the current market rate for TechCo's bonds is 5%/year, what is the market price of each TechCo bond today?
4) You are interested in buying RelCo's stock which currently sells for $19/share. You expect net income for 2017 will be $2.10/share and that RelCo will pay a dividend of $.95/share during 2017. If you believe that RelCo's net income and dividends will grow at 4.5%/year and have estimated its cost of equity to be 9.2%/year, what is your estimate of the stock's true value today?
5) Your company is considering investing $50 million to build a new factory. The new factory is expected to earn after tax profits of $12 million/year for Years 1 and 2 and $13 million/year for Years 3, 4 and 5. If your company's weighted average cost of capital is 7.5%/year, what is the net present value of the new factory?
6) You're a portfolio manager with Fidelity and have been asked to review the risk profile of several mutual funds Fidelity manages. In your opinion:
a. What are the 3 most important areas to analyze to assess risk? and
b. How would you quantify the risk of each mutual fund?