Question 1: If you invest $10,000 today at 3 percent compounded monthly, how much will you have after 10 years?
Question 2: How much would you have to invest today in order to receive $10,000 in 5 years at an assumed 5% APR and quarterly compounding?
Question 3: What is the present value of $10,000 to be received for each of the next 5 years at an assumed 4% APR.
Question 4: What are the monthly payments required in order to pay off a $12,000 auto loan at an assumed 5% APR over a 3 year period?
Question 5: A corporation issued a $1,000 par value bond paying 3% interest with 15 years to maturity. Assume the current yield to maturity on such bonds is 3 %. What is the price of the bond?
Question 6: A corporation will pay a $1.00 dividend (D1) in the next 12 months on a share of common stock. The required rate of return is 5 % and the constant growth rate is 4 %.Compute the theoretical stock price Po.
Question 7: The preferred stock of a corporation pays an annual dividend of $1.00. It has a required rate of return of 4 %. Compute the price of the preferred stock.
Question 8: A $1,000 par value bond has 10 years to maturity. The bond pays $40 a year in interest and is selling for $950. Given a 30% tax bracket, what is the after tax cost of this debt?
Question 9: A share of preferred stock is selling for $20 with an estimated floatation cost of $1 per share. It is anticipated that the preferred stock will pay $1.50 per share in dividends. Compute the cost of the preferred stock to the issuing corporation.
Question 10: A corporation expects to pay dividends (D1) of $1.75 per share at the end of the current year and the current price of its common stock is $30 per share. The expected growth rate is 3.5% and floatation costs of $1.00 per share are anticipated. Making use of the constant growth model, compute the cost of this new common equity.
Question 11: Making use of the Capital Asset Pricing Model, compute the cost of Common equity assuming a risk free rate of 3.5%, a market rate of 5% and An assumed beta of 1.3.
Question 12: Assume the following capital structure:
Debt 30%
Preferred stock 10%
Common equity 60 %
The following facts are provided:
Bond yield to maturity 5%
Corporate tax rate 35%
Dividend, Pre. stock $1.75
Price, Pre. stock $25.00
Floatation, Pre. stock $1.00
Dividend (Do), Com. Stock $1.00
Price, Com. Stock* $15.00
Growth rate, Com. Stock 2%
* You are to assume this to be issued common stock with a zero floatation cost.
Compute the weighted average cost of capital
Question 13: Please assume the following cash flow data:
Year Cash Flow
a. - $120,000
b. 48,000
c. 72,000
d. 104,000
Required: Please calculate each of the following:
a. The Payback
b. The Internal Rate of Return
c. The Net Present Value at an assumed capital cost of 12 %.
d. The Modified Internal Rate of Return.