Question

1. An annual coupon bond has a coupon rate of 5.4%, face value of $1,000, and 4 years to maturity. If its yield to maturity is 5.4%, what is its Modified Duration? Round to three decimal places.

2. A semi-annual coupon bond has MacD of 23.6 years, yield-to-maturity of 6.6%, and price of $1071.43. What is its DV01? Answer in dollars, rounded to three decimal places.

3. You own a bond portfolio worth $31,000. You estimate that your portfolio has an average YTM of 6.7% and a Modified Duration of 8 years. If your portfolio's average YTM were to decrease by 5 basis points, how much would the value of your portfolio change? Round to the nearest cent. ​[Hint: Answer is positive if the portfolio value increases and negative if the value decreases]

4. You estimate that a company's enterprise value is $166 million. If it has $77 million debt, $6 million in cash, and there are 18 million shares outstanding, what should be its stock price? Round to one decimal place.

5. A company has announced total revenues of $229 million, gross profits of $150 million, operating income of $130 million, and net income of $57 million. What is its net profit margin? Answer in percent, rounded to one decimal place. (e.g., 26.73% = 26.7)

6. What is the free cash flow of a firm with revenues of $229 million, operating profit margin of 47%, tax rate of 22%, depreciation and amortization expense of $29 million, capital expenditures of $31 million, acquisition expenses of $9 million and change in net working capital of $11 million? Answer in millions, rounded to one decimal place (e.g., $245.63 = 245.6).

7. What's the FCFF of a company with total revenues of $729 million, operating profit margin of 46%, tax rate of 22% and reinvestment rate of 71%? Answer in millions, rounded to one decimal place.

8. You are valuing a company with free cash flows expected to grow at a stable 2.8% rate in perpetuity. Analysts are forecasting free cash flows of $16 million for next year (FCFF1). The company has $23 million of debt and $8 million of cash. Cost of capital is 10.6%. There are 23 million shares outstanding. How much is each share worth according to your valuation? Round to one decimal place.

9. A company is projected to generate free cash flows of $629 million per year for the next 3 years (FCFF1, FCFF2 and FCFF3). Thereafter, the cash flows are expected to grow at a 2.8% rate in perpetuity. The company's cost of capital is 7.7%. The company owes $186 million to lenders and has $56 million in cash. If it has 193 million shares outstanding, what is your estimate for its stock price? Round to one decimal place.

10. A company is projected to generate free cash flows of $329 million next year, growing at a 5.7% rate until the end of year 3. After that, cash flows are expected to grow at a stable rate of 2.1%. The company's cost of capital is 13.3%. The company owes $171 million to lenders and has $37 million in cash. If it has 114 million shares outstanding, what is your estimate for its stock price? Round to one decimal place.

Answer 1

1]

Modified duration is calculated using MDURATION function in Excel :

Settlement = date today, which is 03/21/2020

Maturity = maturity date, which is 4 years from today, or 03/21/2024

coupon = coupon rate = 5.4%

yld = YTM = 5.4%

Frequency = number of coupon payments per year = 1

MDURATION is calculated to be 3.513