Tech Temps has an issue of preferred stock outstanding that pays stockholders a dividend equal to $10 each year. If the appropriate required rate of return for this stock is 8%, what is its market value?

e.Tech Temps' financial statements show the following information:

Average cost of funds10.0 %

EBIT$500,000

Total capital$1,250,000

EPS$2.00

Shares outstanding150,000

Marginal tax rate30.0%

(1)Compute the company's economic value added (EVA)

(2)Interpret the value you computed in part l(1).

f.Suppose that normally Tech Temps' P/E ratio is 20x. Using the information given previously, estimate the market price per share for Tech Temps' common stock.

g.What are the key features of a bond?

h.How do you determine the value of a bond?

i.What is the value of a 1-year, $1,000 par value bond with a 10% annual coupon if its required rate of return is 10%? What is the value of a similar 10-year bond?

j.What isinterest rate price risk?Which bond has more interest rate price risk, a one-year bond or a 10-year bond? Why is this?

k.What isinterest reinvestment rate risk?Which bond has more interest rate reinvestment rate risk (assuming a 10-year investment horizon)?