Please help with review of 11.1 formula set up in excel.and need help with understanding 11.7.

9.1 Find the following values for a lump sum assuming annual compounding: a. The future value of $500 invested at 8 percent for one year. 1 Nper Number of periods 500 Pv Present value 0.08 Rate Interest Rate 133.1 540 $540.00 b. The future value of $500 invest at 8 percent for 5 years. 5 Nper Number of periods 500 Pv Present value 0.08 Rate Interest Rate 133.1 734.6640384 $734.66 c. The present value of $500 to be received in one year when the opportunity cost rate is 8 percent. Fv Future value 1 Nper Number of periods 500 Pv Present Value 0.08 Rate Interest Rate $ 462.96 d. The present value of $500 to be received in five years when the opprotunity cost rate is 8 percent. Fv Future value 1 Nper Number of periods 500 Pv Present Value 0.08 Rate Interest Rate $ 340.29 9.8 What is the present value of perpetuity of $100 per year if the appropriate discoun Suppose that interest rates doubled in the economy and the appropriate discount rate What would happen to the present value of the perpetuity? 100 pmt 0.07 Rate $ 1,428.57 Is the present vale. 100 pmt 0.14 rate $ 714.29 The present value has dropped in the case when the interest rate doubles. The present value of the perpetuity would decrease in value. 9.9 Assume that you just won $35 million in the Florida lottery, and hence the state will pay you 20 annual payments of $1.75 million each beginning immediately. If the rate of return on securities of similar risk to the lottery earnings (e.g., the rate on 20-year U.S. Treasury bonds) is 6 percent, what is the present value of your winnings? 20 Nper number of periods -1.75 Pmt Payment 0.6 Rate Interest rate $35,257.42 is the present value of my winnings 9.10 An investment that you are considering promises to pay $2,000 semiannually for the next two years beginning six months from now. You have determined that the appropriate opprotunity cost (discount) rate is 8 percent, compounded quarterly. What is the value of this investment? 4 Nper 2000 Pv 0.08 Rate 0.04 Rate Number of periods Present value Interest rate interest rate $ 2,339.72 is the value of the this investment $ 2,339.72 $2,339.72 4 periods x 2 years = 8 8/2= 4% er year if the appropriate discount rate is 7 percent? nd the appropriate discount rate is now 14 percent. when the interest rate doubles. ay you 20 annual at is the present next two years ost (discount) Assume Venture Healthcare sold bonds that have a 10-year maturity, a 12 percent coupon rate with annual payments, and a $1,000 par value. a. Suppose that two years after the bonds were issued, the required interest rat 7 percent. What would be the bonds' value? b. Suppose that two years after the bonds were issued, the required interest rat What would be the bonds' value? c. What would be the value of the bonds three years after issue in each scenario interest rates stayed steaady at either 7 percent or 13 percent? 8N 120 PMT 7% 1/yr 1000 Fv Number Payment Future value $1,298.56 a. The bond value would be $1,298.56 8N 120 PMT 13% 1/yr 1000 Fv Number Payment Future value $952.01 b. The bond value would be $952.01 7N 120 PMT 13% 1/yr 1000 Fv $955.77 Number Payment Future value 7N 120 PMT 7% 1/yr 1000 Fv Number Payment Future value $1,269.46 C. The bond value after three years would be $1,269.46 if the interest rate was ear maturity, $1,000 par value. the required interest rate fell to the required interest rate rose to 13 percent. er issue in each scenario above, assuming that Future value if the interest rate was at 7%; and $955.77 if the interest rate was at 13%. Nper Pv Fv Rate number of periods Present value (bond price) Future value Interest Rate Regal Health Plans issued a 12 percent annual coupon bo remaining to maturity and sells for $1,100. The bond has bond in four years at a call price of $1,060. a. What is the bond's yield to maturity? b. What is the bond's yield to call? ercent annual coupon bond a few years ago. The bond now has 10 years for $1,100. The bond has a call provision that allows Regal to call the Jane's sister-in-law, a stockbroker at Invest, Inc., is trying to get Jane to buy the stock of HealthWest, a regional HMO. The stock has a current market price of $25, its last divide was $2.00, and the company's earnings and dividends are expected to increase at a constant growth rate of 10 percent. The required return on this stock is 20 percent. From a strict valuation standpoint, should Jane buy the stock? ane to buy the stock price of $25, its last dividend ted to increase at a tock is 20 percent. $ 1.50 D0 5.0% E(g) 16.0% R(Rs) $ 14.32 Last dividend payment Expected growth rate Lucas Clinic's last dividend was $1.50. Its current equilibrium stock p expected growth rate is a constant 5 percent. If the stockholders' req Required rate of return expected dividend yield and expected capital gains yield for the com 1.5 D0 5.0% E(g) 16.0% R(Rs) Last dividend payment Expected growth rate Required rate of return urrent equilibrium stock price is $15.75, and its nt. If the stockholders' required rate of return is 15 percent, what is the tal gains yield for the coming year? end payment growth rate rate of return Calculate the after-tax cost of debt for the Wallace Clinic, a for-profit healthcare provider, a rate set on its debt is 11 percent and its tax rate is a. 0 percent b.20 percent c. 40 percent rofit healthcare provider, assuming that the coupon Richmond Clinic has obtained the following estimates for its costs of debt and equity at variou Percent Debt 0% 20 40 60 80 After-Tax Cost of Debt -6.6% 7.8 10.2 14.0 Cost of Equity 16% 17 19 22 27 What is the firm's optimal capital structure? (Hint: Calculate its corporate cost of capital at eac component costs at alternative capital structures are not reliable in real-world situations.) s of debt and equity at various capital structures; Cost of Equity orporate cost of capital at each structure. Also, note that data on in real-world situations.)