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Question 10(9 points)

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Easy Car Corp. is a grocery store located in the Southwest. It paid an annual dividend of $4.00 last year to its shareholders and plans to increase the dividend annually at the rate of 5.0%. It currently has 1,000,000 common shares outstanding. The shares currently sell for $11 each. Two years ago, Easy Car Corp. issued 10,000 semiannual 27-year bonds with a coupon rate of 9% and a par value of $1,000. The bonds currently have a yield to maturity (YTM) of 12%. What is the weighted average cost of capital (WACC) for Easy Car Corp. if the corporate tax rate is 20%?

When answering this problem enter your answer using percentage notation but do not use the % symbol and use two decimals (rounding). For example, if your answer is 0.10469then enter 10.47; if your answer is 10%then enter 10.00

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Question 13(5 points)

Manzana Inc. is buying a piece of equipment. The equipment costs $3,000,000. The equipment is considered for tax purposes as a 5-year MACRS class. If the equipment is sold at the end of 4 years for $500,000, what is the after-tax cash flow from the sale of this asset (termination value of the equipment)? The marginal tax rate is 20 percent.

The annual expense percentage for a 5-year MACRS property from year 1 to 6 respectively are: 20.00%; 32.00%; 19.20%; 11.52%; 11.52: and 5.76%.

In entering your answer, do not use $ sign, use commas to separate thousands, and round to the nearest dollar. For example, if your obtain $30,450.92then enter 30,451; if you obtain $30,000.00then enter 30,000

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Question 16(5 points)

You are presented with the following information:

A call option with a current value of $7.40. A put option with a current value of $6.30. Both options written on the same stock, with 1 year until expiration, and a strike price of $42.00. The prevailing risk-free rate is 5.00%. What must be the current price of the stock on which these two options are written? ***In your calculations, use simple discounting instead of continuous discounting.Also, do not enter the dollar sign anduse two decimals(round off to 2 decimals).

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Question 17(3 points)

VVVInc.'s preferred stock is currently traded at $100 per share.Its par value is $90 per share and pays a 10% dividend. What is the company's cost of preferred stock?

When answering this problem enter your answer using percentage notation but do not use the % symbol and use two decimals (rounding). For example, if your answer is 0.10469then enter 10.47; if your answer is 10%then enter 10.00

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Question 18(4 points)

You are offered an investment with returns of $ 1,571 in year 1, $ 4,700 in year 2, and $ 4,043 in year 3. The investment will cost you $ 6,918 today. If the appropriate Cost of Capital (quoted interest rate) is 7.5 %, what is the Net present Value of the investment? Enter your answer to the nearest $.01. Do not use the $ sign or commas in your answer. If the NPV is negative, use the - sign.Your Answer: