1. Big Top Inc. reported net operating profit after tax (or unlevered net profit) of $260 million for the most recent fiscal year. The firm had depreciation expenses of $100 million, capital expenditures of $200 million, no interest expense, and an income tax rate of 30%. Working capital increased by $10 million. Calculate the free cash flow for Big Top for the most recent fiscal year.
A. $75 million
B. $95 million
C. $150 million
D. $170 million
E. $350 million
2. Bow Right Corp. issues a bond with a face value of $1000, coupon rate of 4.00%, and maturity of 30 years. Coupon payments are made semiannually. On the issuance date of the Bow Right bond, other similar bonds in the market offer a yield to maturity of 4.00% per year, compounded semiannually. Chen bought the bond at market prices at issuance and holds the bond for six months. During the six months, the market yield to maturity decreases to 3.00% per year, compounded semiannually. Compute Chen’s rate of return for the six-month holding period.
A. 2.00%
B. 4.00%
C. 17.49%
D. 19.49%
E. 21.49%