Here is are some multiple choice study questions I'm having trouble understanding. Some of the math questions to solve is difficult. Can you also explain to me how you determine each answers.

Assume coupons are paid annually. Here are the prices of three bonds with 10-year maturities: Bond Coupon (%) 5 7 9 Price (%) 81.00 100.00 131.00 a. What is the yield to maturity for each bond? (Round your answers to 1 decimal place.) Bond Coupon (%) 5 7 9 YTM % % % b. Which bond offered the highest yield to maturity? 5% coupon bond 9% coupon bond 7% coupon bond c. Which bond offered the lowest yield to maturity? 9% coupon bond 5% coupon bond 7% coupon bond d-1. Which bond had the longest duration? 5% coupon bond 7% coupon bond 9% coupon bond d-2. Which bond had the shortest duration? 5% coupon bond 7% coupon bond 9% coupon bond a. An 7.1%, ten-year bond yields 5.1%. If the yield remains unchanged, what will be its price one year hence? Assume annual coupon payments. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Price $ b. What is the total return to an investor who held the bond over this year? (Do not round intermediate calculations. Round your answer to 1 decimal place.) Total return % A 10-year bond is issued with a face value of $1,000, paying interest of $60 a year. Assume market yields increase shortly after the T-bond is issued. a. What happens to the bond's coupon rate? Rises Falls Does not change b. What happens to the bond's price? Rises Falls Does not change c. What happens to the bond's yield to maturity? Rises Falls Does not change Maple Aircraft has issued a 5.00% convertible subordinated debenture due 2014. The conversion price is $48.00 and the debenture is callable at 103.00% of face value. The market price of the convertible is 91.25% of face value, and the price of the common is $42.50. Assume that the value of the bond in the absence of a conversion feature is about 65.25% of face value. a. What is the conversion ratio of the debenture? (Round your answer to 2 decimal places.) Conversion ratio b. If the conversion ratio were 50.25, what would be the conversion price? (Round your answer to 2 decimal places.) Conversion price $ c. What is the conversion value? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Conversion value % d. At what stock price is the conversion value equal to the bond value? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Stock price $ e. Can the market price be less than the conversion value? Yes No f. How much is the convertible holder paying for the option to buy one share of common stock? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Convertible pay $ g. By how much does the common have to rise by 2014 to justify conversion? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Conversion value % h. When should Maple call the debenture? (Round your answer to 2 decimal places.) When the price of the bond reaches % of face value. The trust company for a bond issue represents the: managers of the firm. firm's shareholders. firm's board of directors. firm's bondholders. Which of the following bonds is secured by assets? A mortgage bond A floating rate bond A debenture An indenture Long-term bonds that are unsecured obligations of a company are called: Indentures. Debentures. Mortgage bonds. Bearer bonds. The recovery rate o following type of de Firms often bundle cash flows from the They are called: A sinking fund is useful to a corporation because: the corporation does not have to worry about paying the bondholders. it provides the corporation with the option to buy the bonds back at the lower of face value or market price. the payments to the sinking fund are not necessary when the firm is in financial difficulty. they are simple and easy to monitor. A puttable provision in a bond allows the: issuer to call the bond at par on the coupon payment date. holder to redeem the bond at par before maturity. issuer to extend the maturity of the bond. holder to extend the maturity of the bond. Which of the following is not an example of an affirmative (positive) covenant? Requirement to maintain a minimum level of working capital Requirement to furnish bondholders with a copy of the firm's annual accounts Requirement to limit dividends to net income Requirement to maintain a minimum level of net worth If a corporate security can be exchange for a fixed number of shares of stock, the security is said to be: callable. convertible. protected. none of the options. A $1,000 face value bond can be exchanged any time for 25 shares of stock. Then the conversion price is: $40 $25 $100 $975 1). EZCUBE Corp. is 54% financed with long-term bonds and 46% with common equity. The debt securities have a beta of 0.19. The company's equity beta is 1.21. What is EZCUBE's asset beta? (Do not round intermediate calculations. Round your answer to 3 decimal places.) Beta of assets 2). A project has a forecasted cash flow of $118 in year 1 and $129 in year 2. The interest rate is 5%, the estimated risk premium on the market is 12%, and the project has a beta of 0.58. If you use a constant risk-adjusted discount rate, what is a. The PV of the project? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Present value $ b. The certainty-equivalent cash flow in year 1 and year 2? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Cash Flow Year 1 Year 2 $ $ c. The ratio of the certainty-equivalent cash flows to the expected cash flows in years 1 and 2? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Ratio Year 1 Year 2 3). Following information for Golden Fleece Financial: 440,00 0 6% 17,000 $ 50.4 $ 39 13 % Long-term debt outstanding: $ Current yield to maturity (rdebt): Number of shares of common stock: Price per share: Book value per share: Expected rate of return on stock (requity): Calculate Golden Fleece's company cost of capital. Ignore taxes. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Cost of capital % 4). A company is 40% financed by risk-free debt. The interest rate is 10%, the expected market risk premium is 8%, and the beta of the company's common stock is .5. a. What is the company cost of capital? (Do not round intermediate calculations. Round your answer to 1 decimal place.) Cost of capital % b. What is the after-tax WACC, assuming that the company pays tax at a 35% rate? (Do not round intermediate calculations.) After-tax WACC referencesebook % & resources 5). EZCUBE Corp. is 50% financed with long-term bonds and 50% with common equity. The debt securities have a beta of .15. The company's equity beta is 1.25. What is EZCUBE's asset beta? (Do not round intermediate calculations. Round your answer to 1 decimal place.) Beta of assets 6). A project has a forecasted cash flow of $110 in year 1 and $121 in year 2. The interest rate is 5%, the estimated risk premium on the market is 10%, and the project has a beta of .5. If you use a constant riskadjusted discount rate, what is a. The PV of the project? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Present value $ b. The certainty-equivalent cash flow in year 1 and year 2? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Cash Flow Year 1 Year 2 $ $ c. The ratio of the certainty-equivalent cash flows to the expected cash flows in years 1 and 2? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Ratio Year 1 Year 2 7). A project has the following forecasted cash flows: C0 100 Cash Flows, ($ thousands) C1 C2 +40 +60 C3 +50 The estimated project beta is 1.5. The market return rm is 16%, and the risk-free rate rf is 7%. a. Estimate the opportunity cost of capital and the project's NPV (using the same rate to discount each cash flow). (Do not round intermediate calculations. Enter your answers in thousands. Round your answers to 2 decimal places.) Cost of capital NPV % $ b. What are the certainty-equivalent cash flows in each year? (Do not round intermediate calculations. Enter your answers in thousands. Round your answers to 2 decimal places.) Certainty-Equivalent Cash Flow $ $ $ Year 1 2 3 c. What is the ratio of the certainty-equivalent cash flow to the expected cash flow in each year? (Do not round intermediate calculations. Round your answers to 4 decimal places.) Year 1 2 3 Ratio 8). Using a company's cost of capital to evaluate a project is: I) always correct; II) always incorrect; III) correct for projects that have average risk compared to the firm's other assets I only II only III only I and III only 9). The market value of Charter Cruise Company's equity is $15 million and the market value of its debt is $5 million. If the required rate of return on the equity is 20% and that on its debt is 8%, calculate the company's cost of capital. (Assume no taxes.) 20% 17% 14% 11% 10). One calculates the after-tax weighted average cost of capital (WACC) using which of the following formulas: WACC = (rD) (D/V) + (rE) (E/V), where: V = D + E. WACC = (rD) (1 - TC) (D/V) + (rE) (1 - TC) (E/V), where: V = D + E. WACC = (rD) (D/E) + (rE) (E/D). WACC = (rD) (1 - TC) (D/V) + (rE) (E/V), where: V = D + E. 11). To calculate the total value of the firm (V), one should rely on the: market values of debt and equity. market value of debt and the book value of equity. book values of debt and the market value of equity. book values of debt and equity. 12). Given are the following data for Vinyard Corporation: Calculate the proportions of debt (D/V) and equity (E/V) that you would use for estimating Vinyard's weighted average cost of capital (WACC): 40% debt and 60% equity. 50% debt and 50% equity. 25% debt and 75% equity. 75% debt and 25% equity. 13). A firm has a total market value of $10 million while its debt has a market value of $4 million. What is the aftertax weighted average cost of capital if the before-tax cost of debt is 10%, the cost of equity is 15%, and the tax rate is 35%? 13.0% 11.6% 8.8% 10.4% 14). Project M requires an initial investment of $25 million. The project is expected to generate $2.25 million in aftertax cash flow each year forever. If the weighted average cost of capital (WACC) is 9%, calculate the NPV of the project. -2.5 million +2.5 million zero +2.1 million 15). Consider the following data for Kriya Company: A constant growth rate of 4% is sustained forever after year 3. The weighted average cost of capital is 10%. Calculate the present value of the horizon value. (Assume that the horizon value includes the 6.24M FCF in year 4.) $90.4 million $104 million $78.1 million $75.1 million 1). EZCUBE Corp. is 54% financed with long-term bonds and 46% with common equity. The debt securities have a beta of 0.19. The company's equity beta is 1.21. What is EZCUBE's asset beta? (Do not round intermediate calculations. Round your answer to 3 decimal places.) Beta of assets 2). A project has a forecasted cash flow of $118 in year 1 and $129 in year 2. The interest rate is 5%, the estimated risk premium on the market is 12%, and the project has a beta of 0.58. If you use a constant risk-adjusted discount rate, what is a. The PV of the project? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Present value $ b. The certainty-equivalent cash flow in year 1 and year 2? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Cash Flow Year 1 Year 2 $ $ c. The ratio of the certainty-equivalent cash flows to the expected cash flows in years 1 and 2? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Ratio Year 1 Year 2 3). Following information for Golden Fleece Financial: 440,00 0 6% 17,000 $ 50.4 $ 39 13 % Long-term debt outstanding: $ Current yield to maturity (rdebt): Number of shares of common stock: Price per share: Book value per share: Expected rate of return on stock (requity): Calculate Golden Fleece's company cost of capital. Ignore taxes. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Cost of capital % 4). A company is 40% financed by risk-free debt. The interest rate is 10%, the expected market risk premium is 8%, and the beta of the company's common stock is .5. a. What is the company cost of capital? (Do not round intermediate calculations. Round your answer to 1 decimal place.) Cost of capital % b. What is the after-tax WACC, assuming that the company pays tax at a 35% rate? (Do not round intermediate calculations.) After-tax WACC referencesebook % & resources 5). EZCUBE Corp. is 50% financed with long-term bonds and 50% with common equity. The debt securities have a beta of .15. The company's equity beta is 1.25. What is EZCUBE's asset beta? (Do not round intermediate calculations. Round your answer to 1 decimal place.) Beta of assets 6). A project has a forecasted cash flow of $110 in year 1 and $121 in year 2. The interest rate is 5%, the estimated risk premium on the market is 10%, and the project has a beta of .5. If you use a constant riskadjusted discount rate, what is a. The PV of the project? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Present value $ b. The certainty-equivalent cash flow in year 1 and year 2? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Cash Flow Year 1 Year 2 $ $ c. The ratio of the certainty-equivalent cash flows to the expected cash flows in years 1 and 2? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Ratio Year 1 Year 2 7). A project has the following forecasted cash flows: C0 100 Cash Flows, ($ thousands) C1 C2 +40 +60 C3 +50 The estimated project beta is 1.5. The market return rm is 16%, and the risk-free rate rf is 7%. a. Estimate the opportunity cost of capital and the project's NPV (using the same rate to discount each cash flow). (Do not round intermediate calculations. Enter your answers in thousands. Round your answers to 2 decimal places.) Cost of capital NPV % $ b. What are the certainty-equivalent cash flows in each year? (Do not round intermediate calculations. Enter your answers in thousands. Round your answers to 2 decimal places.) Certainty-Equivalent Cash Flow $ $ $ Year 1 2 3 c. What is the ratio of the certainty-equivalent cash flow to the expected cash flow in each year? (Do not round intermediate calculations. Round your answers to 4 decimal places.) Year 1 2 3 Ratio 8). Using a company's cost of capital to evaluate a project is: I) always correct; II) always incorrect; III) correct for projects that have average risk compared to the firm's other assets I only II only III only I and III only 9). The market value of Charter Cruise Company's equity is $15 million and the market value of its debt is $5 million. If the required rate of return on the equity is 20% and that on its debt is 8%, calculate the company's cost of capital. (Assume no taxes.) 20% 17% 14% 11% 10). One calculates the after-tax weighted average cost of capital (WACC) using which of the following formulas: WACC = (rD) (D/V) + (rE) (E/V), where: V = D + E. WACC = (rD) (1 - TC) (D/V) + (rE) (1 - TC) (E/V), where: V = D + E. WACC = (rD) (D/E) + (rE) (E/D). WACC = (rD) (1 - TC) (D/V) + (rE) (E/V), where: V = D + E. 11). To calculate the total value of the firm (V), one should rely on the: market values of debt and equity. market value of debt and the book value of equity. book values of debt and the market value of equity. book values of debt and equity. 12). Given are the following data for Vinyard Corporation: Calculate the proportions of debt (D/V) and equity (E/V) that you would use for estimating Vinyard's weighted average cost of capital (WACC): 40% debt and 60% equity. 50% debt and 50% equity. 25% debt and 75% equity. 75% debt and 25% equity. 13). A firm has a total market value of $10 million while its debt has a market value of $4 million. What is the aftertax weighted average cost of capital if the before-tax cost of debt is 10%, the cost of equity is 15%, and the tax rate is 35%? 13.0% 11.6% 8.8% 10.4% 14). Project M requires an initial investment of $25 million. The project is expected to generate $2.25 million in aftertax cash flow each year forever. If the weighted average cost of capital (WACC) is 9%, calculate the NPV of the project. -2.5 million +2.5 million zero +2.1 million 15). Consider the following data for Kriya Company: A constant growth rate of 4% is sustained forever after year 3. The weighted average cost of capital is 10%. Calculate the present value of the horizon value. (Assume that the horizon value includes the 6.24M FCF in year 4.) $90.4 million $104 million $78.1 million $75.1 million