Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Please help, I only have 2 hours to finish homework 1.A project requires $31,917 of equipment that is classified as a 7-year property. What is

Please help, I only have 2 hours to finish homework

1.A project requires $31,917 of equipment that is classified as a 7-year property. What is the depreciation expense in Year 2 given the following MACRS depreciation allowances, starting with year one: 14.29, 24.49, 17.49, 12.49, 8.93, 8.92, 8.93, and 4.46 percent?

2.What is the modified internal rate of return (MIRR) of this project? Assume that the required rate is 14%

YearCF

0-$22,000

1$ 8,700

2$ 1,400

3$ 4,300

4$ 1,750

5$ 4,600

3.Project A requires an initial investment of $10,000 at t = 0.Project A has an expected life of 3 years with cash inflows of $6,000, $4,500, $6,000 at the end of Years 1, 2, and 3 respectively.The project has a required return of 9%.What is the equivalent annual annuity?

4.ABC Company offers a 5% coupon bond with a current market price of $850.25. The yield to maturity is 7.34%. The face value is $1,000. Interest is paid semiannually. What is the number of years until the bond matures?

5.A 4.1% bond has a maturity of 6 years. The par value of the bond is $1,000. If the yield to maturity is 5.4% and the interest payments are made semi-annually, then what is the current price of the bond?

6.ABC Company has $1,000 face value bonds outstanding. These bonds pay interest semiannually, mature in 9 years, and have a 6.5 percent coupon.The current price of the bond is $1100. What is the yield to maturity?

7.A 12-year project is expected to generate annual sales of $170,379, variable costs of $31,143, and fixed costs of $55,049. The annual depreciation is $12,718 and the tax rate is 38 percent. What is the annual operating cash flow?

8.Five years ago, ABC Company invested $49,871 in a machinery. The investment in net working capital was $9,936 which would be recovered at the end of the project. Today, ABC Company is selling the machinery for $22,063. The book value of the machinery is $10,355. The tax rate is 32 percent. What are the terminal cash flows in Year 5?

9.Based on the following information, what is the portfolio beta?

Stock

Value

Beta

A

$15,061

1.92

B

$10,806

0.42

C

$33,372

2.13

D

$30,678

2.37

10. What is the NPV of this project if the required rate is 7%?

YearCF

0-$1,312

1$743

2$1,757

3$2,148

11.Suppose the nominal rate is 13.08% and the inflation rate is 5.24%. Solve for the real rate. Use the Fisher Effect formula.

12. A project has an initial requirement of $77,167 for equipment.The equipment will be depreciated to a zero book value over the 5-year life of the project.The investment in net working capital will be $12,826.All of the net working capital will be recouped at the end of the 5 years.The equipment will have an estimated salvage value of $17,008.The annual operating cash flow is $38,680. The cost of capital is 14 percent. What is the projects net present value if the tax rate is 21 percent?

13.1ABC Company is considering a new project. The project is expected to generate annual sales of $93,368, variable costs of $22,321, and fixed costs of $8,344. The depreciation expense each year is $13,103 and the tax rate is 32 percent. What is the annual operating cash flow?

14.What is the project's initial investment outlay based on the following information: The machinery could be purchased for $29,268. Shipping and installation costs would cost another $1,633. The project would require an initial investment in net working capital of $2,679. The company's tax rate is 30%

15. The risk-free rate is 4.7%, the market risk premium is 11.7%, and the stocks beta is 1.43.What is the required rate of return on the stock, E(Ri)?

Use the CAPM equation.

16. What is the Profitability Index (PI) of this project if the required rate is 17%?

YearCF

0-$2,196

1$1,259

2$1,090

3$1,562

4$671

5$729

17.Over the past six years, a stock had annual returns of 10 percent, 5 percent, 7 percent, 8 percent, 2 percent, and -11 percent, respectively. What is the standard deviation of these returns?

18.ABC Company is considering an investment that will cost the company $477 at time=0. The after-tax cash flows are expected to be $91 each year for 12 years. What is the payback period?

19.You have invested $86,037 portfolio in three securities. The three securities comprise of the risk-free asset, Stock A, and Stock B. The beta of stock A is 2 while the beta of stock B is 0.2. 24% of the portfolio is invested in the risk-free security. What is the dollar amount invested in stock B if the beta of the portfolio is 1.3?

20.One year ago, you puchased 136 shares of ABC stock for $45.75 per share. During the year, you receiveda dividend of $5.99 per share. Today, you sold all your shares for$53.41. What are the percentage return on your investment?

21.ABC Inc. is considering an investment of $1,322 million with after-tax cash inflows of $334 million per year for six years and an additional after-tax salvage value of 11 million in Year 6. The required rate of return is 15%. What is the investments Profitability Index (PI)?

22. ABC Company purchased a new machinery 4 years ago for $50,538. Today, it is selling this equipment for $20,298. What is the after-tax salvage value if the tax rate is 22 percent?

The MACRS allowance percentages are as follows, commencing with year one: 20.00, 32.00, 19.20, 11.52, 11.52, and 5.76 percent.

23.You have a $62,959 portfolio that consists of $15,877 invested in Stock A, $16,388 invested in Stock B, $7,358 invested in Stock C, and the remainder in Stock D. The portfolio has a return of 22.8 percent. The return for Stock A is 13.5 percent, for Stock B is 27.1 percent, and for Stock C is 15.1 percent. What is the return for Stock D?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Mergers, Acquisitions and Other Restructuring Activities

Authors: Donald DePamphilis

8th edition

9780128024539, 128013907, 978-0128013908

More Books

Students also viewed these Finance questions