1. A $50,000 bond is twelve years from maturity. On close inspection, you realize it provides no coupon payments. You buy it for $14,285. What is the bonds YTM? 2. Canadian Tire Corporation trades on the TSX for around 140.50/share. The growth rate of its dividend is a constant (relatively speaking) 3.25% and CTCs most recent dividend (annualized) was $6.90. a. What will next years dividend be? b. What is the implied rate of return on CTC stock? c. If you buy at 140.50, and sell next year at 121.25, what will have been your ROR1-yr? 3. Goose Lane, a publisher located here in Fredericton, is seeking to diversify its strategy. It wishes to purchase the English-language rights to the Japanese manga series Classroom Soul Slayer. It will cost $2.90 million for licensing and translation of the 20-volume series. It is anticipated the series will generate $800,000/yr in profits for seven years, after which the right of ownership reverts back to the creator. Furthermore, at termination (i.e., at the end of seven years), Goose Lane is required to remit a single-payment royalty fee equal to one years worth of profits (again, expected to be $800,000). Assume Goose has an 10% RRR. Calculate the simple payback period. (A timeline is optional for this problem.) 4. Youve moved on from UNB and are now working as a financial analyst for Toronto Dominion Bank at their headquarters on Wellington Street in Hogtown. Youve decided to rent a parking space in a garage off Wellington. Because youve agreed to a five-year lease, youve been given a deala mere $4000/year, which works out to a monthly fee thats rather reasonable for downtown Toronto. Still, $20,000 for parking over the life of the lease feels like a rather big bite in the butt, until you remember the time value of money! If the market portfolio is earning 8%, what are you actually paying for the five years in todays dollars? Keep in mind that the first payment is due immediately upon signing the contract (naturally). Challenge questions are not marked. 5. The Canadian media giant, Thomson Reuters (TRI) sells for $173.25/share, and provides an annual dividend of $2.70/share. The market portfolio is currently providing 7% return. a. Were the dividends for this stock to never grow, what would the stock be worth? b. Given the stocks price, and assuming next years dividend is to be $3.00, what is its dividends growth rate? 6. An entrepreneur is setting up a new printing press. Given the onset of the digital era, the company can purchase used commercial presses at bargain prices. The entrepreneur has found one of the best for $500,000. A lot with a small (but adequate) building on it in the Fredericton industrial park will cost $600,000. Finally, upgrading the building to code will cost another $300,000. The entrepreneur is projecting profits in the neighbourhood of $300,000/year. She only expects to be in business for eight years and will then retire, and which point she plans to give the business to her daughter (and then perhaps work part-time for the daughter). However, presses generate a lot of toxic chemicals (the cleaning solvents), which can be stored on site, but eventually must be properly disposed of. Her intention is to dispose of the chemicals just prior to handing over the business to her daughter. Shes guessing that the one-time disposal fee will be about $120,000. Demonstrate that the IRR of this business venture is 13%. 7. Take another gander at the Goose Lane story (problem #3). What is the discounted payback period for the project? (A timeline with a vertical running-total column is required for this problem.) 8. Imagine that a stocks dividends have grown at a fairly constant rate of 3.5% per year what would you pay for this stock if next years dividend is expected to be $3.40? (Assume the market portfolio is earning 8.5% right now.)