Unit 7: Final Exam Show your work! The bonds issued by Stainless Tubs bear a 6 percent coupon, payable semiannually. The bonds mature in 11 years and have a $1,000 face value. Currently, the bonds s

Unit 7: Final Exam

Show your work!

  1. The bonds issued by Stainless Tubs bear a 6 percent coupon, payable semiannually. The bonds mature in 11 years and have a $1,000 face value. Currently, the bonds sell for $989. What is the yield to maturity?  What is the current yield?  
  2. You are considering the following two mutually exclusive projects. The required rate of return is 11.25% for project A and 10.75% for project B. Which project should you accept? 

YEARPROJECT APROJECT B0-$48,000-$126,0001$18,400$69,7002$31,300$80,9003$11,700$0

3. A project has an initial cost of $8,500 and produces cash inflows of $2,700, $4,800, and $1,600 over the next three years, respectively. What is the NPV if the required rate of return is 8%? 4. Ginny Trueblood is considering an investment, which will cost her $120,000. The investment produces no cash flows for the first year. In the second year, the cash inflow is $35,000. This inflow will increase to $55,000 and then $75,000 for the following two years before ceasing permanently. Ginny requires a 10% rate of return and has a required payback period of three years.  Should the project be accepted?

5. A semiannual 10% coupon bond that matures in 40 years has a current price of $800.  What is its yield to maturity (YTM)?

6. Boogie Woogie Dance Studio has 9.8% coupon bonds on the market with 18 years to maturity.  The bonds make semiannual payments and currently sell for 106.8 percent of par value.  What is the current yield on these bonds?

7. Mitzi’s, II. bonds offer a 5% semi-annual coupon at a current market price of $989.20 and 20 years to maturity. The bonds have a face value of $1,000 and. What is the current yield on these bonds?

8. Toby’s has a profit margin of 8.6 percent, a return on assets of 14.5 percent, and a debt to equity ratio of 1.4. What is the return on equity?

Use the information below to answer questions 8, 9, and 10.

                                                   2013        2014                                

Sales

$4,300

$5,500

Depreciation

750

850

COGS

2422

2533

Interest Expense

180

196

Cash

200

400

Accts Receivables

200

300

Notes Payable

100

150

Long-term debt

2956

1835

Net fixed assets

8000

9500

Accounts Payable

50

100

Inventory

1800

1700

Dividends

225

250

Tax rate

35%

30%

9. What is the ROA for 2014?

10. What are the day’s sales in inventory (Inventory period) in 2014?

11. What is the quick ratio for 2014?

12. Bonner Collision has shareholders’ equity of $141,800. The firm owes a total of $126,000 of which 60 percent are current liabilities. The firm net fixed assets of $161,900. What is the amount of the net working capital? 

13. A firm has a total debt ratio of 57 percent, a total asset turnover of 1.12, and a profit margin of 4.9 percent. The total assets are $511,640. What is the amount of the net income? 

14. Zombie Corp. has a profit margin of 5.1%, total asset turnover of 1.95, and ROE of 15%.  What is the firm’s debt-equity ratio?

15. You are comparing two annuities with equal present values. The applicable discount rate is 9.5 percent. One annuity pays $11,000 on the first day of each year for twenty years. How much does the second annuity pay each year for twenty years if it pays at the end of each year? 

16. An investment pays $1500 every six months (semiannually) over the next 5 years at an annual rate of 8%.  What is the future value of the investment?

17. What is corporate governance?  How does corporate governance affect the returns generated for stockholders?

  1. You are considering buying a car. The sticker price is $15,000 and you decide to make a $2,000 down payment.  Find your monthly payments over 5 years if the interest rate is 10%.

19. You estimate that you will have $30,500 in student loans by the time you graduate. The interest rate is 6.5 percent. If you want to have this debt paid in full within five years, how much must you pay each month?

  1. An investment project provides cash flows of $1,190 per year for 10 years. If the initial cost is $8,000, what is the payback period?

21. Why do U.S. corporations go international?

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