Question
1. What is the after-tax cost of $2,000 in interest expense paid on a loan if the marginal tax rate is 30%? $1,400 2. Your
1. What is the after-tax cost of $2,000 in interest expense paid on a loan if the marginal tax rate is 30%? $1,400
2. Your bank pays 5% interest and interest is compounded annually. If you deposit $10,000 into the account on January 1 and continue to deposit $10,000 every year at the beginning of each year for the next 5 years, how much will you have at the END of year 5? (Hint, there are six payments. Draw a timeline). $71,420
3. Let's assume you have $50,000 invested in a mutual fund that has an expected return of 12%, $45,000 invested in Treasury securities with an expected return of 2% and $250,000 invested in your 401(k) account with an expected return of 8%. What is the expected return on your portfolio? (Round to the nearest tenth percent). 7.8%
4.What is the yield to maturity on a semi-annual coupon bond that is currently selling for $1,048 if the bonds pay a 12% coupon and have ten years to maturity? 11.19%
5. If a firm has a debt-to-equity ratio of .7, a total asset turnover of 1.5 and a net profit margin of 5%, what is its return on equity? 12.75%
6.Assume you deposit $150,000 into an account that earns 4% interest, compounded quarterly. How much should you have in 10 years? $223,330
7. If a firm's WACC is 10.25%, their after-tax cost of debt is 5% and they have $100,000 in debt and $200,000 in equity, what is their cost of equity?12.875%
8. Find the WACC of a company with $100M in debt and $250M in equity if its cost of debt is 8% and its cost of equity is 12%. It's marginal tax rate is 35%. 10.4%
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