Question
Can you help me with these last few problems please? Thanks! 7. (8 points possible) ( 2 points each) a. $1000 invested for 5 years
Can you help me with these last few problems please? Thanks!
7. (8 points possible) ( 2 points each) a. $1000 invested for 5 years with simple annual interest of 10% would have a future value of _________. b. $1000 invested for 5 years at 10%, compounded annually has a future value of _________. c. Present value of a future payment of $10,000 at the end of year three when interest rates are 4.5% d. When interest rates are at 4%, which would be better, taking $15,000 today, or $18,000 in four years? Show calculations.
8. (9 points possible) Suppose your company needs to raise $10 million to construct a new office building at an expanded manufacturing site. As CFO, you plan to raise the money by selling 30-year $1,000 par value bonds with a coupon rate of 6% which is the Yield in Maturity on your firms outstanding bonds. Between the time that your bond agreement is finalized and the bonds are sold to investors, inflation spikes and adds 2% to the required return on your bonds. a. (3 points possible)Prior to the rate increase, how many bonds would your company need to issue to fund the capital investment under consideration? b. (3 points possible)-- After the rate increase, how many bonds would your firm need to issue to fund the capital investment under consideration? c. (3 points possible )--Suppose your firm could issue 10-year bonds instead of the 30-year bonds. How many of the 10-year bonds would your firm need to sell?
9. (8 points possible) Suppose your firm needs to raise $10.5 million to construct a new shipping terminal. As CFO, you plan to raise funds in the following manner: a. 60% of the funds will be raised by selling long term debt (bonds) b. 40% of the funds will be raised by retaining operating earnings. For a debt issue, 2.5% of the amount raised will be kept by the Investment Banker, as gross spread. How much capital will you need to raise in order to build your shipping term
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