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/introduction-to-finance-markets-investments-and-financial-management_ebook_15e (16 Ques)




Using Excel, complete the following problems from chapters 9, 10, and 11 in the textbook;You must use Excel. The assignment has been uploaded in word format, these are the correct questions I have also provided a link to the book.;;This is a business finance course.;p-4) 4. You are planning to invest $2,500 today for three years at a nominal;interest rate of 9 percent with annual compounding.;a. What would be the future value (FV) of your investment?;b. Now assume that inflation is expected to be 3 percent per year;over the same three-year period. What would be the investments;FV in terms of purchasing power?;c. What would be the investment?s FV in terms of purchasing;power if infl ation occurs at a 9 percent annual rate?9-6);9-9) 9. Assume you are planning to invest $5,000 each year for six years;and will earn 10 percent per year. Determine the future value;(FV) of this annuity if your first $5,000 is invested at the end of;the first year.;9-14) 14. You are considering borrowing $150,000 to purchase a new;home.;a. Calculate the monthly payment needed to amortize an 8;percent fi xed-rate 30-year mortgage loan.;b. Calculate the monthly amortization payment if the loan in (a);was for 15 years.;9-15) 15. Assume a bank loan requires an interest payment of $85 per year;and a principal payment of $1,000 at the end of the loan?s eight-year life.;a. At what amount could this loan be sold for to another bank if;loans of similar quality carried an 8.5 percent interest rate?;That is, what would be the present value (PV) of this loan?;b. Now, if interest rates on other similar quality loans are 10;percent, what would be the PV of this loan?;c. What would be the PV of the loan if the interest rate is 8;percent on similar quality loans?;10-2) 2. What are the major sources of long-term funds available to business;corporations? Indicate their relative importance.;10-6) 6. The Garcia Company?s bonds have a face value of $1,000, will;mature in ten years, and carry a coupon rate of 16 percent. Assume;interest payments are made semi-annually.;a. Determine the present value of the bond?s cash fl ows if the;required rate of return is 16 percent.;b. How would your answer change if the required rate of return;is 12 percent?;10-7) 7. Judith, Inc., bonds mature in eight years and pay a semi-annual;coupon of $55. The bond?s par value is $1,000.;a. What is their current price if the market interest rate for;bonds of similar quality is 9.2 percent?;b. A change in Fed policy increases market interest rates 0.50;percentage points from their level in part (a). What is the;percentage change in the value of Judith, Inc. bonds from;their value in part (a)?;c. Better profits for Judith, Inc. reduces the market interest rate;for its bonds to 9.0 percent. What is the percentage change in;the value of Judith, Inc. bonds from the answer in part (b)?;10-21)21.You purchased 200 shares of H2O Corporation stock at a price of;$20. Consider each of the following announcements separately. What;will the price of the stock be after each change? How many shares will;you own? What will be the total value of your holdings (value of stock;plus any income)?;a. The firm announces a 10 percent stock dividend.;b. The firm announces a two-for-one stock split.;c. The firm announces a $0.50 per share dividend (in your;answer use the price of the stock on the ex-dividend date).;d. The firm announces it will repurchase 10 percent of its shares;you do not offer to sell any of your shares10-24) 24. Why does dividend income;growth exceed that of bond income;growth over a period of time?;10-25) 25. The French Thaler and Company?s stock has paid dividends of;$1.60 over the past 12 months. Its historical growth rate of dividends;has been 8 percent, but analysts expect the growth to slow to 5 percent;annually for the foreseeable future.;a. Determine the value of the stock if the required rate of return;on stocks of similar risk is 15 percent. b. If analysts believe the risk premium on;the stock should be;reduced by 2 percentage points, what is the new required rate of;return on French Thaler and Company stock? How much should;its price change from the answer you computed in part (a)?;11-4) 4. You purchased shares of Broussard Company using 50 percent;margin, you invested a total of $20,000 (buying 1,000 shares at a price;of $20 per share) by using $10,000 of your own funds and borrowing;$10,000. Determine your percentage profi t or loss under the following;situations (ignore borrowing costs, dividends, and taxes). In addition;what would the percentage profi t and loss be in these scenarios if;margin were not used?;a. the stock price rises to $23 a share;b. the stock price rises to $30 a share;c. the stock price falls to $16 a share;d. the stock price falls to $10 a share;11-6) 6. The Trio Index is comprised of three stocks, Eins, Zwei, and Tri.;Their current prices are listed below.;STOCK PRICE AT TIME (t);Eins $10;Zwei $20;Tri $40;a. Between now and the next time period, the stock prices of Eins;and Zwei increase 10 percent while Tri increases 20 percent.;What is the percentage change in the price-weighted Trio Index?;b. Suppose instead that the price of Eins increases 20 percent;while Zwei and Tri rise 10 percent. What is the percentage;change in the price-weighted Trio Index? Why does it differ;from the answer to part a?;11-9) 9. A U.S. fi rm wants to raise $10 million of capital so it can invest in;new technology. How much will it need to raise to net $10 million;using the average costs of raising funds in the chapter?;11-10) 10. A U.S. fi rm wants to raise $15 million by selling 1 million shares;at a net price of $15. We know that some say that fi rms ?leave;money on the table? because of the phenomenon of underpricing.;a. Using the average amount of underpricing in U.S. IPOs, how;many fewer shares could it sell to raise these funds if the fi rm;received a net price per share equal to the value of the shares;at the end of the fi rst day?s trading?;b. How many less shares could it sell if the IPO was occurring in;Germany?;c. How many less shares could it sell if the IPO was occurring in;Korea?;d. How many less shares could it sell if the IPO was occurring in;Canada?;11-12) 12. Boneyard Biscuits? Dutch auction for an IPO was a great success.;The fi rm offered 100 million shares. Bids appear below.;BIDDER BID PRICE NUMBER OF SHARES;Manahan $25.25 25 million;Campbell 24.95 30 million;Maloney 24.75 25 million;Touma 24.40 10 million;Clark 24.40 30 million;Fry 24.25 15 million;a. What is the clearing price?;b. What options do Boneyard and its underwriters have for allocating;shares? How many shares will each bidder receive;under each option?


Paper#30843 | Written in 18-Jul-2015

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