1. What is the price of a bond if the par value is $1000, coupon rate is 5% (paid semi-annually), has 20 years to maturity and the market rate (yield to maturity per annum) is 8%? A. $683.11 B. $703.11 C. $813.11 D. $923.11 E. 1,063.11
2. What is the coupon rate of a bond with a par value of $1000, it is currently selling for $800, has 15 years to maturity and the market rate (yield to maturity) is 10% per annum? Assume the coupon payments are made monthly. A. 6.66% B. 7.77% C. 8.88% D. 9.99% E. 10.10%
3. The dividend that was just paid for ABC stock was $3.25. The company is expected to grow at 6% in the next 4 years and then have a constant growth of 3% after that forever. The cost of capital (equity) is 5%. What should be the stock price of this company now? A. $153.12 B. $172.67 C. $187.33 D. $198.77 E. $213.15
4. Leo company is considering a new venture in office equipment. It expects the cost of acquisition of land and building to be $100,000. Leo company expects cash flows to be $40,000 the first year and $45,000 for the next 4 years. It will discontinue the furniture operation upon the completions of the 5th year. Assume no salvage value. The company’s WACC is 10%.
What is Leo company’s IRR? A. 24% B. 19% C. 10% D. 26% E. 33%
5. What is Leo company’s NPV and should they accept or reject the project? Assume no other projects exist and that NPV should be used to make the decision. A. $75,120; accept project B. $66,040; accept project C. $80,230; accept project D. $(8,090); reject project E. $(9,324); reject project.