1. Marta borrows Birr 5000 from a bank at 12% compounded monthly and promises to discharge the debt by equal payments at the end of each month for three years.

Required:

Find the amount of each payment

A. Find the total payment to be made by Marta

B. Find the total interest amount paid by Marta

C. Find the total interest amount paid by Marta

2. .Mr. X wants to have birr 80,000 available 6 years from now for his master’s degree study. This will be accumulated by making equal deposits at the end of each month in his saving account that ears 10% interest compounded monthly.

Required:

A. Find the amount of each deposit

B. Find the total interest amount

1. What amount and compound interest would be in the account after 5 years if Ato Dawit deposited Birr 100,000 in his saving account at 6% compounded,

A. monthly

B. quarterly

C. semi-annually

D. annually

E. weekly

4. The current dividend, D0, of the stock of Sun Devil Corporation is $3 per share. Under present conditions, this dividend is expected to grow at a rate of 6 percent annually for the foreseeable future. The beta of Sun Devil stock is 1.5. The risk-free rate of return is 7 percent and the expected market rate of return is 14 percent. At what price would you expect Sun Devil common stock to sell?

5. Palencia Paints Corporation has a target capital structure of 35% debt and 65% common equity, with no preferred stock. Its before-tax cost of debt is 8%, and its marginal tax rate is 40%. The current stock price, P0 is 5 $22.00. The last dividend was D0= $2.25, and it is expected to grow at a 5% constant rate. What is its cost of common equity and its WACC?

6. Holt Enterprises recently paid a dividend, D0, of $2.75. It expects to have non constant growth of 18% for 2 years followed by a constant rate of 6% thereafter. The firm’s required return is 12%.

A. How far away is the horizon date?

B. What is the firm’s horizon value?

C. What is the firm’s intrinsic value today, P0?

6. Mullineaux Corporation has a target capital structure of 60 percent common stock, 5 percent preferred stock, and 35 percent debt. Its cost of equity is 12 percent, the cost of preferred stock is 5 percent, and the pretax cost of debt is 7 percent. The relevant tax rate is 35 percent. What is Mullineaux’s WACC?

7. Lohn Corporation is expected to pay the following dividends over the next four years: $12,

$8, $7, and $2.50. Afterward, the company pledges to maintain a constant 5 percent growth rate in dividends forever. If the required return on the stock is 12 percent, what is the current share price?

8. Suppose Ford Motor Company sold an issue of bonds with a 10-year maturity, a $1,000 par value, a 10 percent coupon rate. At what price would the bonds sell if interests are paid

A. semiannually?

B. annually

9.Phillips corporation has a book value of $800,000 issued bonds. Bonds with similar characteristics are yielding6.75 percent before tax. The company also has $750,000preferred stock. The cost of preferred stock is 7 percent. The book value of common stock was $2.5 million. The common stock has a beta of 1.34. The U.S. Treasury bill (risk free rate) is yielding 2.8 percent and the return on the market is 11.2 percent. The corporate tax rate is 38 percent. What is the firm's weighted average cost of capital?

10. Suppose a 10-year, $1000 bond with an 8% coupon rate and semiannual coupons is trading for a price of $1034.74. What is the bond’s yield to maturity?

Answer rating: 100% (QA)

To solve the financial questions provided well use various financial formulas Lets address each question one by one 1 Marta borrows Birr 5000 from a bank at 12 compounded monthly and promises to disch... View the full answer