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10) Bond Valuation with Annual Payments

Jackson Corporation's bonds have 12 years remaining to maturity. Interest is paid annually, the bonds have a $1,000 par value, and the coupon interest rate is 10%. The bonds have a yield to maturity of 11%. What is the current market price of these bonds? Do not round intermediate calculations. Round your answer to the nearest cent.

11) Bond Valuation with Semiannual Payments

Renfro Rentals has issued bonds that have a 10% coupon rate, payable semiannually. The bonds mature in 7 years, have a face value of $1,000, and a yield to maturity of 8.5%. What is the price of the bonds? Round your answer to the nearest cent.

12) Bond Valuation and Interest Rate Risk

The Garraty Company has two bond issues outstanding. Both bonds pay $100 annual interest plus $1,000 at maturity. Bond L has a maturity of 15 years, and Bond S has a maturity of 1 year.

What will be the value of each of these bonds when the going rate of interest is 5%? Assume that there is only one more interest payment to be made on Bond S. Do not round intermediate calculations. Round your answers to the nearest cent.

Bond L: $

Bond S: $

What will be the value of each of these bonds when the going rate of interest is 9%? Assume that there is only one more interest payment to be made on Bond S. Do not round intermediate calculations. Round your answers to the nearest cent.

Bond L: $

Bond S: $

What will be the value of each of these bonds when the going rate of interest is 13%? Assume that there is only one more interest payment to be made on Bond S. Do not round intermediate calculations. Round your answers to the nearest cent.

Bond L: $

Bond S: $

Why does the longer-term (15-year) bond fluctuate more when interest rates change than does the shorter-term bond (1 year)?

I. Longer-term bonds have more interest rate risk than shorter-term bonds. II. Longer-term bonds have less interest rate risk than shorter-term bonds. III. Longer-term bonds have less reinvestment rate risk than shorter-term bonds.

-Select-IIIIIIItem 7

13) Payback, NPV, and MIRR

Your division is considering two investment projects, each of which requires an up-front expenditure of $23 million. You estimate that the cost of capital is 9% and that the investments will produce the following after-tax cash flows (in millions of dollars):

Year	Project A		Project B
1	5		20
2	10		10
3	15		8
4	20		6

What is the regular payback period for each of the projects? Round your answers to two decimal places.

Project A: years

Project B: years

What is the discounted payback period for each of the projects? Do not round intermediate calculations. Round your answers to two decimal places.

Project A: years

Project B: years

If the two projects are independent and the cost of capital is 9%, which project or projects should the firm undertake?

The firm should undertake -Select-Project AProject Bboth projectsItem 5 .

If the two projects are mutually exclusive and the cost of capital is 5%, which project should the firm undertake?

The firm should undertake -Select-Project AProject BItem 6 .

If the two projects are mutually exclusive and the cost of capital is 15%, which project should the firm undertake?

The firm should undertake -Select-Project AProject BItem 7 .

What is the crossover rate? Round your answer to two decimal places.

%

If the cost of capital is 9%, what is the modified IRR (MIRR) of each project? Do not round intermediate calculations. Round your answers to two decimal places.

Project A: %

Project B: %

14) New-Project Analysis

Madison Manufacturing is considering a new machine that costs $350,000 and would reduce pre-tax manufacturing costs by $110,000 annually. Madison would use the 3-year MACRS method to depreciate the machine, and management thinks the machine would have a value of $33,000 at the end of its 5-year operating life. The applicable depreciation rates are 33.33%, 44.45%, 14.81%, and 7.41%. Working capital would increase by $35,000 initially, but it would be recovered at the end of the project's 5-year life. Madison's marginal tax rate is 25%, and a 13% cost of capital is appropriate for the project.

Calculate the project's NPV, IRR, MIRR, and payback. Do not round intermediate calculations. Round the monetary value to the nearest dollar and percentage values and payback to two decimal places. Negative values, if any, should be indicated by a minus sign.

NPV: $

IRR: %

MIRR: %

The project's payback: years

Assume management is unsure about the $110,000 cost savings - this figure could deviate by as much as plus or minus 20%. Do not round intermediate calculations. Round your answer to the nearest dollar. Negative values, if any, should be indicated by a minus sign.

Calculate the NPV if cost savings value deviate by plus 20%.

$

Calculate the NPV if cost savings value deviate by minus 20%.

$

Suppose the CFO wants you to a scenario analysis with different values for the cost savings, the machine's salvage value, and the working capital (WC) requirement. She asks you to use the following probabilities and values in the scenario analysis:

Scenario	Probability	Cost Savings	Salvage Value	WC
Worst case	0.25	$ 88,000	$28,000	$40,000
Base case	0.45	110,000	33,000	35,000
Best case	0.30	132,000	38,000	30,000

Calculate the project's expected NPV, its standard deviation, and its coefficient of variation. Do not round intermediate calculations. Round the monetary values to the nearest dollar and a coefficient of variation to two decimal places. Negative values, if any, should be indicated by a minus sign.

The project's expected NPV: $

Standard deviation: $

Coefficient of variation: