Q1.

You are called in as a financial analyst to appraise the bonds of Olsens Clothing Stores. The $1,000 par value bonds have a quoted annual interest rate of 10 percent, which is paid semiannually. The yield to maturity on the bonds is 10 percent annual interest. There are 15 years to maturity. Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods. a. Compute the price of the bonds based on semiannual analysis. (Do not round intermediate calculations. Round your final answer to 2 decimal places.)

You are called in as a financial analyst to appraise the bonds of Olsens Clothing Stores. The $1,000 par value bonds have a quoted annual interest rate of 10 percent, which is paid semiannually. The yield to maturity on the bonds is 10 percent annual interest. There are 15 years to maturity. Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods. a. Compute the price of the bonds based on semiannual analysis. (Do not round intermediate calculations. Round your final answer to 2 decimal places.)

Bond price

b. With 10 years to maturity, if yield to maturity goes down substantially to 8 percent, what will be the new price of the bonds? (Do not round intermediate calculations. Round your final answer to 2 decimal places.) b. With 10 years to maturity, if yield to maturity goes down substantially to 8 percent, what will be the new price of the bonds? (Do not round intermediate calculations. Round your final answer to 2 decimal places.)

New bond price

Q2.

A firm pays a $4.80 dividend at the end of year one (D₁), has a stock price of $80, and a constant growth rate (g) of 5 percent. Compute the required rate of return (K_e). (Do not round intermediate calculations. Input your answer as a percent.)

Rate of return

%

Q3.

Al Rosen invests $25,000 in a mint condition 1952 Mickey Mantle Topps baseball card. He expects the card to increase in value 12 percent per year for the next 10 years.

How much will his card be worth after 10 years? Use Appendix A for an approximate answer, but calculate your final answer using the formula and financial calculator methods. (Do not round intermediate calculations. Round your final answer to 2 decimal places.)

Projected Value-

Q4.

errier Company is in a 40 percent tax bracket and has a bond outstanding that yields 10 percent to maturity.

a. What is Terriers aftertax cost of debt? (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)

Aftertax cost of debt-

b. Assume that the yield on the bond goes down by 1 percentage point, and due to tax reform, the corporate tax rate falls to 25 percent. What is Terriers new aftertax cost of debt? (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places)

Aftertax cost of debt- c. Has the aftertax cost of debt gone up or down from part a to part b?

	It has gone up.
	It has gone down.