1. Assume you have $20,000 to invest in the stock market. Which company would you invest in, Starbucks or Dunkin Donuts? Give supporting calculations to back up your decision.

2. Calculate the intrinsic value of common stock for XYZ at January 1, year 1 given the following:

Book value $70

Predicted earnings per share Years 1through 5 respectively:

$15, $12, 18, $22 and $15

Cost of capital: 10%

No residual income is expected for years 6 and after. No dividends are paid. Would you buy this stock if it were trading at $110 per share?

3. Define what each of the following SEC reports refers to:

Form 10-K

Form 10-Q

Form 8-K

Proxy Statement

4. A company issues $1,000 ten-year bonds with a coupon rate of 6% on January 1, 2014.

Interest is paid at the end of the calendar year. What is the market price of the bonds on January 1, 2018 assuming a market rate of interest 10%. Are the bonds trading at a discount or premium and why?