Please use Excel and show all work including any formulas used. Thank you!

1. As an investor, you are considering an investment in the bonds of the Conifer Coal Company. The bonds, which pay interest semiannually, will mature in eight years, and have a coupon rate of 9.5% on a face value of $1,000. Currently, the bonds are selling for $872.

a. If your required return is 11% for bonds in this risk class, what is the highest price you would be willing to pay?

b. What is the yield to maturity on these bonds if you purchase them at the current price?

c. If the bonds can be called in three years with a call premium of 4% of the face value, what is the yield to call on these bonds?

2. As an analyst at Churnem & Bernem Securities, you are responsible for making recommendations to your firms clients regarding common stocks. After gathering data on Denver Semiconductors, you have found that its dividend has been growing at a rate of 7% per year to the current (D₀) $1.5 per share. The discount rate is 13%.

a. If you expect that the dividend will grow at an 7% rate forever, what is the highest price at which you would recommend purchasing this stock to your clients?

b. Suppose now that you believe that the companys new product line will cause much higher growth in the near future. Your new estimate is for a 20% annual growth for the first 3-year period, followed by an 7% growth rate. Using these new assumptions, what is the value of the stock?

3. You are analyzing the following two mutually exclusive projects and have developed the following information. Please calculate the IRRs for the two projects and the crossover rate. (6 points) Which project should you accept if the cost of capital is 5%, and which project should you accept if the cost of capital is 10%? (4 points)

IRR A:

IRR B:

Crossover Rate:

If WACC=5%, accept _______

If WACC=10%, accept _______

4. Fernando Designs is considering a project that has the following cash flows and WACC data. What is the project's discounted payback period? (10 points)

WACC: 10.00%

Year 0 1 2 3

Cash flows -$900 $500 $500 $500