Question 1. Find the present value of the following:
A. $1,200 in 5 years @ 5%
B. $3,000 in 10 years @ 9%
Question 2. Find the future value of the following:
A. $1,500 in 6 years @ 6%
B. $1,500 in 6 years @ 6% [compounded semi-annually]
Question 3. Find the present value [current price] of a bond with the following:
$1000 par value
7% coupon rate
10% current market yield
20 years till maturity
Question 4. Wizard Company produces a game selling for $32. Last year Wizard sold 50,000 games, each of which costs $6 to produce. Wizard incurred selling and administrative expenses of $80,000 and depreciation expense of $10,000. In addition, Wizard has a $100,000 loan outstanding at 12%. Their tax rate is 40%. There are 100,000 common shares outstanding.
Prepare an income statement for Wizard in good form [include EPS].
Question 5. Calculate the after-tax cost of the interest. Assume the company has issued 10,000 bonds with a coupon rate of 8% and a face value of $1,000 per bond. The company has a marginal tax rate of 35%.