1- Katie Pairy Fruits Inc. has a $2,100, 22-year bond outstanding with a nominal yield of 18 percent (coupon equals 18% $2,100 = $378 per year). Assume that the current market required interest rate on similar bonds is now only 12 percent.

a.Compute the current price of the bond.(Do not round intermediate calculations. Round your final answer to 2 decimal places. Assume interest payments are annual.)

Current price of the bond_________

b.Find the present value of 6 percent $2,100 (or $126) for 22 years at 12 percent. The $126 is assumed to be an annual payment. Add this value to $2,100.(Do not round intermediate calculations. Round your final answer to 2 decimal places. Assume interest payments are annual.)

Present value _______

2- You are called in as a financial analyst to appraise the bonds of Olsen's Clothing Stores. The $1,000 par value bonds have a quoted annual interest rate of 11 percent, which is paid semiannually. The yield to maturity on the bonds is 12 percent annual interest. There are 10 years to maturity. UseAppendix BandAppendix Dfor an approximate answer but calculate your final answer using the formula and financial calculator methods.

a.Compute the price of the bonds based on semiannual analysis.(Do not round intermediate calculations. Round your final answer to 2 decimal places.)

Bond price__________

b.With 5 years to maturity, if yield to maturity goes down substantially to 10 percent, what will be the new price of the bonds?(Do not round intermediate calculations. Round your final answer to 2 decimal places.)

New bond price _________

3- Speedy Delivery Systems can buy a piece of equipment that is anticipated to provide an 7 percent return and can be financed at 4 percent with debt. Later in the year, the firm turns down an opportunity to buy a new machine that would yield a 14 percent return but would cost 16 percent to finance through common equity. Assume debt and common equity each represent 50 percent of the firm's capital structure.

a.Compute the weighted average cost of capital.(Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)

Weighted average cost of capital_________%