Tom Cruise Lines Inc. | |
New Required rate of return | |
Real Rate of Return | 5% |
Inflation Premium | 2% |
Risk Premium | 5% |
Total Return | 12% |
Interest Payment=Face Value* Interest Rate=($1000*15%)= | $ 150.00 |
P.V of annuity (12% for 25 years) | 7.843 |
P.V of Interest Payment=($150*(P.V of 12% for 25 Years)=($150*7.843)=(A) | $ 1,176.45 |
P.V of $1, 12% for 25 years | 0.059 |
Present value of Principal payment at maturity=$1000*(P.V of $1, 12% for 25 years)=($1000*.059)=(B) | $ 59.00 |
New Price of the Bonds=(A)+(B) | $ 1,235.45 |
Tom Cruise Lines Inc. issued bonds five years ago at $1,000 per bond. These bonds had...
You are asked to evaluate the following two projects for the Norton corporation. Use a discount rate of 13 percent. Use Appendix B:for an approximate answer but calculate your final answer using the formula and financial calculator methods. Project X (Videotapes of the Weather Report) ($18,000 Investment) Year Cash Flow $ 9,000 7,000 8,000 7,600 Project Y (Slow-Motion Replays of Commercials) ($38,000 Investment) Year Cash Flow $ 19,000 12,000 13,000 15,000 WN a. Calculate the profitability index for project X....
You are asked to evaluate the following two projects for the Norton corporation. Use a discount rate of 12 percent. Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods. Protect X (Videotapes of the Weather Report) ($ 36,000 Investment) Year Cash Flow $18,000 16,000 17,000 16,600 Project Y (Slow-Motion Replays of Commercials) ($56.000 Investment) Year Cash Flow $ 28,000 21.000 22.000 24,000 a. Calculate the profitability index for project X....
1 Appendix B Present value of $1. PVF PV=FV Percent Period 1% 5% 8% 9% 12% 1 2. 3 0.893 0.797 012 4 6 7 8 9 10 .............. 11 12 0.990 0.980 0.971 0.961 0.951 0.942 0.933 0.923 0.914 0.905 0.896 0.887 0.879 0.870 0.861 0.853 0.844 0.836 0.828 0.820 0.780 0.742 0.672 0.608 2% 0.980 0.961 0.942 0.924 0.906 0.888 0.871 0.853 0.837 0.820 0.804 0.788 0.773 0.758 0.743 0.728 0.714 0.700 0.686 0.673 0.610 0.552 0.453 0.372...
1 Appendix B Present value of $1. PVF PV=FV Percent Period 1% 5% 8% 9% 12% 1 2. 3 0.893 0.797 012 4 6 7 8 9 10 .............. 11 12 0.990 0.980 0.971 0.961 0.951 0.942 0.933 0.923 0.914 0.905 0.896 0.887 0.879 0.870 0.861 0.853 0.844 0.836 0.828 0.820 0.780 0.742 0.672 0.608 2% 0.980 0.961 0.942 0.924 0.906 0.888 0.871 0.853 0.837 0.820 0.804 0.788 0.773 0.758 0.743 0.728 0.714 0.700 0.686 0.673 0.610 0.552 0.453 0.372...
1 Appendix B Present value of $1. PVF PV=FV Percent Period 1% 5% 8% 9% 12% 1 2. 3 0.893 0.797 012 4 6 7 8 9 10 .............. 11 12 0.990 0.980 0.971 0.961 0.951 0.942 0.933 0.923 0.914 0.905 0.896 0.887 0.879 0.870 0.861 0.853 0.844 0.836 0.828 0.820 0.780 0.742 0.672 0.608 2% 0.980 0.961 0.942 0.924 0.906 0.888 0.871 0.853 0.837 0.820 0.804 0.788 0.773 0.758 0.743 0.728 0.714 0.700 0.686 0.673 0.610 0.552 0.453 0.372...
Cascade Mining Company expects its earnings and dividends to
increase by 8 percent per year over the next 6 years and then to
remain relatively constant thereafter. The firm currently (that is,
as of year 0) pays a dividend of $4.5 per share. Determine the
value of a share of Cascade stock to an investor with a 11 percent
required rate of return. Use Table II to answer the question. Round
your answer to the nearest cent.
TABLE II Present...
Keller Construction is
considering two new investments. Project E calls for the purchase
of earthmoving equipment. Project H represents an investment in a
hydraulic lift. Keller wishes to use a net present value profile in
comparing the projects. The investment and cash flow patterns are
as follows: Use Appendix B for an approximate answer but calculate
your final answer using the formula and financial calculator
methods.
Project E
Project H
($40,000 Investment)
($36,000 Investment)
Year
Cash Flow
Year
Cash Flow...
Katie Pairy Fruits Inc. has a $1,700 18-year bond outstanding with a nominal yield of 18 percent (coupon equals 18% * $1,700 = $306 per year). Assume that the current market required interest rate on similar bonds is now only 12 percent. 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 current price of the bond. (Do not round intermediate calculations. Round your final...
You are called in as a financial analyst to appraise the bonds of Olsen's Clothing Stores. The $1,000 par value bonds have a quoted annual interest rate of 9 percent, which is paid semiannually. The yield to maturity on the bonds is 10 percent annual interest. There are 25 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...
DataPoint Engineering is considering the purchase of a new piece of equipment for $255,000. It has an eight-year midpoint of its asset depreciation range (ADR). It will require an additional initial investment of $250,000 in nondepreciable working capital. Eighty-two thousand dollars of this investment will be recovered after the sixth year and will provide additional cash flow for that year. Income before depreciation and taxes for the next six are shown in the following table. Use Table 12-11 Table 12-12....