Foundations of Financial Management 10th Canadian edition Stanley Block, Geoffrey Hirt, Bartley Danielsen, Doug Short, Michael Perretta - Solutions

What is the value of a common share that has just paid a dividend of $2.25, is expecting an indefinite annual growth rate of 5 percent, and requires a return of 17 percent based on perceived market risks?
Calculate the price of a bond originally issued six years ago that pays semiannual interest at the rate of 12 percent and matures in nine years at $1,000. The market currently requires an 8 percent return for a bond of this risk.
A bond just purchased pays annual interest of 10 percent. In seven years it matures at its face value of $25,000. What price was paid if current yields on a bond of this risk are 8.5 percent?
Burrito Bell issued a series of $1,000 bonds eight years ago with an annual coupon rate of $100. The bonds mature 12 years from now. If an investor requires a 6 percent return on this investment, what would be the price of a Burrito Bell bond?
Current yields are 9 percent on a preferred share that pays a perpetual annual dividend of $6.00. What is the appropriate price of one preferred?
With an anticipated dividend of $1.20, continual annual growth of 8 percent, and a market expectation of a 19 percent yield, at what price would a common share sell?
You wish to invest $175,000 in a 12-year annuity. Current yields over the same time to maturity are 8 percent. What could you expect as an annual payment?
You have purchased a preferred share that promises a $3.00 dividend. If you expect a 14 percent yield, what price did you pay for the preferred?
Waterman Company has had a fantastic growth of 22 percent per year, but this growth rate is expected to fall to 6 percent in the near future and then continue at that rate for a long time. Shareholders expect a 17 percent annual rate of return and a dividend of $0.75 next year. What is the share
Lou Spence bought a stock seven years ago for $15.00 a share. If it is now selling for $42.39 a share, what is the stock's compound annual growth rate? (No dividends were paid.)
You are interested in receiving a true yield on a government bond investment of 8 percent. Your broker suggests a 20-year issue with 12 years to maturity, an original coupon rate of 10 percent, payable semiannually, and a face value of $10,000. The bond has had its coupons stripped, so you won't
A national financial institution is currently offering $50,000 a year for life as a special promotion. Current inflation is percent a year, and the real rate of return is assumed to be 3 percent. One could suggest that this financial institution would receive a 2 percent premium for the risk
Thunderbay Ltd. has a 20-year bond outstanding that matures in 14 years. The annual coupon rate is 11 percent, paid semiannually. Current annual nominal yields for bonds of similar risk are 9 percent. What is the price of this bond?
Royal Blue Bonds were purchased nine years ago at $1,000, with a 13 percent annual coupon. Today they are sold for $1,215. Assuming the coupons were reinvested at 9 percent, what was the annual yield actually received?
Tom Gilbert, founder and chair of the board of Gilbert Enterprises, could not believe his eyes as he read the quote about his firm in The Globe and Mail. The stock had closed at $35.25, down $3.75 for the week. He called his vice-president of finance , Jane Arnold, and they agreed to meet on
Bonds issued by the Bullwinkle Corporation have a par value of $1,000, are selling for $1 ,100, and have 7 years to maturity. The annual interest payment is 9 percent, payable semiannually. Find yield to maturity by combining the trial-and error approach with interpolation.
The Wild Rose Company has $1,000 par value (maturity value) bonds outstanding at 9 percent interest. The bonds will mature in 20 years with annual payments. Compute the current price of the bonds if the present yield to maturity isa. 6 percentb. 8 percentc. 12 percent
Bonds issued by the Peabody Corporation have a par value of $1,000, are selling for $890, and have 18 years to maturity. The annual interest payment is 8 percent. Find yield to maturity by combining the trial-and-error approach with interpolation. (Use an assumption of annual interest payments.)
Dr. Sisters has been secretly depositing $10,500 in her savings account every December starting in 1994. Her account earns 6 percent compounded annually. How much did she have in December 2005? (Assume a deposit is made in 2005.) Make sure to carefully count the years.
At a growth (interest) rate of 8 percent annually, how long will it take for a sum to double? To triple? Select the year that is closest to the correct answer.
If you owe $30,000 at the end of seven years, how much should your creditor accept in payment immediately if she could earn 11 percent on her money?
Cousin Berta invested $100,000 ten years ago at 12 percent, compounded quarterly.a. How much has she accumulated?b. What is her effective annual interest rate (rate of return)?
Determine the amount of money in a savings account at the end of five years, given an initial deposit of $3,000 and an 8 percent annual interest rate when interest iscompounded(a) Annually, (b) Semiannually,(c) Quarterly. Calculate the effective annual interest rate of each compounding
Joe Macro wishes to have accumulated $60,000 ten years from today by making an equal annual deposit into an account that pays 10 percent, compounded quarterly.a. What is the effective annual interest rate?b. How large an annual deposit is required to meet Joe's objective?c. How large an annual
Sally Gravita has received a settlement from an insurance company that will pay her $23,500 annually for 12 years. Current interest rates are 8 percent, compounded semiannually.a. What is the effective annual interest rate?b. How much is the present worth of Sally's settlement?c. How much is the
Your grandfather has offered you a choice of one of the three following alternatives: $5,000 now; $1,000 a year for eight years; or $12,000 at the end of eight years. Assuming you could earn 11 percent annually, which alternative would you choose? If you could earn 12 percent annually, would you
You need $23,000 at the end of 7 years, and your only investment outlet is a 9 percent long-term certificate of deposit (compounded annually). With the certificate of deposit, you make an initial investment at the beginning of the first year.a. What single payment could be made at the beginning of
Amy Hirt started a paper route on January 1, 2009. Every three months, she deposits $300 in her bank account, which earns 8 percent annually but is compounded quarterly. On December 31, 2012, she used the entire balance in her bank account to invest in a contract that pays 14 percent annually. How
On January 1, 2013, Charley Dow bought 1,000 shares of stock at $12 per share. On December 31, 2015, he sold the stock for $18 per share. What was his annual rate of return?
AI Counsel purchased 357 shares of Eco-Survival Tours on July 1, 2013 for $5.00 per share. Find his annual rate of return if he sold the stocka. On June 30, 2014, for $6.00 per share.b. On December 31,2016, for $10.92 per share.c. On June 30, 2019, for $8.39 per share.
John Foresight has just invested $8,370 for his son (age one). The money will be used for his son's education 17 years from now. He calculates that he will need $90,000 for his son's education by the time the boy goes to school. What rate of return will Mr. Foresight need to achieve this goal?
Chris Seals has just given an insurance company $56,521. In return, she will receive an annuity of $7,500 for 12 years.a. At what rate of return must the insurance company invest this $56,521 to make the annual payments?b. What rate of return is required if the annuity is payable at the beginning
Mr. G. Day has approached his bank about a loan. He expects to receive $30,000 in three years and $85,000 nine years from now. These funds will be applied against the loan as they are received. The bank suggests that interest rates will be 9 percent for the next five years and 7 percent in
Ms. R. Emm has purchased land for $90,000 in cash today and another $45,000 four years from today. Interest rates over a four-year period are currently 8 percent, compounded semiannually. Calculate the cash value of the property.
Count Crow wishes to have a large celebration eight years from today costing $150,000. Currently, he has an investment of $625,000 in a financial institution earning 7.5 percent interest annually. Count Crow also wishes to receive an annual payment from his investment over this period at the
Graham Bell has just retired after 30 years with the telephone company. His total pension funds have an accumulated value of $300,000, and his life expectancy is 16 more years. His pension fund manager assumes he can earn a 7 percent return on his assets. What will be his yearly annuity for the
River Babylon, an archaeology professor, invests $65,000 in a parcel of land that is expected to increase in value by 8 percent per year for the next five years. He will take the proceeds and provide himself with a 12-year annuity. Assuming a 9 percent interest rate, how much will this annuity be?
Una Day is planning to retire in 20 years, at which time she hopes to have accumulated enough money to receive an annuity of $12,000 a year for 25 years of retirement. During her pre-retirement period she expects to earn 8 percent annually, while during retirement she expects to earn 10 percent
You wish to retire after 30 years, at which time you want to have accumulated enough money to receive an annuity of $55,000 a year for 18 years of retirement.During the period before retirement, you can earn 9 percent annually, while after retirement you can earn 7 percent on your money.a. What
Your retirement planning suggests a goal of $57,000 a year in today's dollars for 30 years of retirement. Retirement will begin 35 years from today, at which time you will expect your first annuity payment. Inflation between now and retirement is expected to be 4 percent annually (do not consider
For your retirement you would like to receive $75,000 a year in today's dollars for a period of 25 years. A problem, of course, is that you expect inflation to average 2.5 percent a year for the next 33 years until your retirement. (Inflation will not be a concern during retirement.) Interest rates
How does a firm's price-earnings ratio relate to Ke? To g?
Darla White has just purchased an annuity to begin payment at the end of 2019 (that is the date of the first payment) . Assume it is now the beginning of 2016. The annuity is for $12,000 per year and is designed to last 8 years. If the interest rate for this problem is 11 percent, what is the most
Emphatically Square and heirs will receive $1,000 a year forever with a long-term annual expected interest rate of 7 percent. What is the current worth of this annuity?
Forever College will provide a scholarship of $7,500 a year forever with a long-term annual expected interest rate of 6 percent. What is the current worth of this annuity?
On second thought, Emphatically Square and heirs will receive $1,000 a year forever that will grow by 3 percent annually. The long-term annual expected interest rate is 7 percent. What is the current worth of this annuity?
On second thought, Forever College will provide a scholarship of $7,500 a year forever, growing in value by 2 percent per year. The long-term annual expected interest rate is 6 percent. What is the current worth of this annuity?
These valuation models are based on investors' required rates of return and their reflection in the prices of the assets. Does the change in price always occur according to the model?
On third thought, Emphatically Square and heirs will receive $1,000 a year for only 25 years, but it will grow by 3 percent annually. The long-term annual expected interest rate is 7 percent. What is the current worth of this annuity?
On third thought, Forever College will provide a scholarship of $7,500 a year for only 30 years, growing in value by 2 percent per year. The long-term annual expected interest rate is 6 percent. What is the current worth of this annuity?
For your retirement you would like to receive the equivalent of $90,000 a year in today's dollars for a period of 30 years. You expect inflation to average 3 percent a year for the next 70 years. Yields (borrowing rates equal lending rates in this perfect market without taxes) are expected to be 5
If you borrow $9,725 and are required to pay back the loan in five equal annual installments of $2,500, what is the interest rate associated with the loan?
Sarah Adia owes $15,000 now. A lender will carry the debt for three more years at 8 percent interest. That is, in this particular case, the amount owed will go up by 8 percent per year for three years. The lender then will require that Sarah pay off the loan over the next 5 years at 9 percent
If your uncle borrows $50,000 from the bank at 10 percent interest over the eight year life of the loan, what equal annual payments must be made to discharge the loan, plus pay the bank its required rate of interest (round to the nearest dollar)?How much of his first payment will be applied to
Peter Piper has applied for a mortgage of $120,000. Interest is computed at 8.5 percent compounded semiannually. The mortgage will be paid off over 20 years.a. Calculate Peter's monthly payment.b. Calculate Peter's weekly payment.c. Calculate Peter's biweekly (every 2nd week) payment.
Ocean Spray has applied for a mortgage of $200,000. Interest is computed at 4.5 percent compounded semiannually. The mortgage will be paid off over 25 years.a. Calculate Ocean's monthly payment.b. Calculate Ocean's weekly payment.c. Calculate Ocean's biweekly (every 2nd week) payment.
Bing and Monica Cherrie require a mortgage of $145,000 and can afford monthly payments of $1,150 on the mortgage. Current interest rates are 4 percent compounded semiannually. How long should the Cherries select to pay off the mortgage (the amortization period)?
Deidre Hall can afford monthly payments of $690 on a mortgage. Current mortgage rates are 3.5 percent, compounded semiannually. The longest period over which a mortgage can be amortized is 25 years. What size mortgage can Deidre afford?
Your younger sister, Barbara, will start college in five years. She has just informed your parents that she wants to go to Eastern University, which will cost $15,000 per year for four years (assumed to come at the end of each year). Anticipating Barbara's ambitions, your parents started investing
Barbara (from previous problem) is now 18 years old (five years have passed), and she wants to get married instead of going to school. Your parents have accumulated the necessary funds for her education.Instead of her schooling, your parents are paying $7,000 for her upcoming wedding and plan to
Mr. Rambo, President of Assault Weapons Inc. was pleased to hear that he had three offers from major defence companies for his latest missile firing automatic ejector. He will use a discount rate of 12 percent to evaluate each offer. Offer 1 $500,000 now plus $120,000 from the end of year 6
Larry Do by invests $50,000 in a mint condition 1952 "Rocket" Richard Topps hockey card. He expects the card to increase in value 8 percent per year for the next five years. How much will his card be worth after five years?
What is meant by real rate of return?
Dr. Painkiller is going to borrow $3,000 for one year at 8 percent interest. What is the annual rate of interest if the loan is discounted?
Your bank will lend you $3,000 for 50 days at a cost of $45 interest. What is your annual rate of interest? What is your effective annual rate?
Your bank will lend you $2,000 for 45 days at a cost of $25 interest. What is your annual rate of interest? What is your effective annual rate?
What is an asset-backed public offering?
Sampson Orange Juice Company normally takes 30 days to pay for its average daily credit purchases of $7,500. Its average daily sales are $9,000, and it collects its accounts in 34 days.a. What is its net credit position?b. If the firm extends its average payment period from 30 days to 45 days (and
McGriff Dog Food Company normally takes 20 days to pay for average daily credit purchases of $9,000. Its average daily sales are $10,000 and it collects accounts in 25 days.a. What is its net credit position?b. If the firm extends its average payment period from 20 days to 32 days (and all else
The average price on 182-day Treasury bills was 98.097 with maturity value at 100. Calculate the T-hill's annualized yield.
The average price on 91-day Treasury bills at a recent Tuesday auction was 98.671 with maturity value 100. Calculate the T-bill's annualized yield.
Chris Angle can borrow from its bank at 8 percent to take a cash discount. The terms of the cash discount are 1/10 net 60. Should Chris borrow the funds?
Little Kimi Clothiers can borrow from its bank at 6 percent to take a cash discount. The terms of the cash discount are 2/15 net 90. Should the firm borrow the funds?
Mr. Paul Promptly is a very cautious businessman. His suppliers offer trade credit terms of 3/10, net 70. Mr. Promptly never takes the discount offered, but he pays his suppliers in 60 days rather than the 70 days allowed so that he is sure the payments are never late. What is Mr. Promptly's cost
S. Pumpkins has an average inventory of $630,000, with an annual turnover rate of eight times. The average accounts receivable balance is $520,250, and customers pay on average in 30 days. S. Pumpkins pays accounts in 45 days.a. Calculate S. Pumpkins' average accounts payable balance.b. Calculate
To finance additional inventory, Arbutus Ltd. is considering forgoing the cash discount on all of its purchases presently offered on terms of 2/10, net 45. No payments will be stretched. Annual purchases are $9.21 million.a. Calculate the additional financing available to Arbutus Ltd. by forgoing
Joan Lucky won the $80 million lottery. She is to receive $1 million a year for the next 50 years plus an additional lump-sum payment of $30 million after 50 years. The discount rate is 12 percent. What is the current value of her winnings?
The Epic Contest awards $10,000,000. It will be paid over the next 50 years at the rate of $250,000 per year with the first payment today. With a discount rate of 9 percent, what is the present value of this prize?
a. Using a current long-term interest rate, recommend a proposal to the Boone family. Justify your choice of discount rate.b. Now assume that a discount rate of 11 percent is used. Which of the three alternatives provides the highest present value?c. Explain why the change in outcome takes place
Marty Not is going to borrow $8,000 for 120 days and pay $215 in interest. What is the annual rate of interest if the loan is discounted?
George Penny will receive $32,250 for the next 10 years as a payment for a slogan he coined. Currently a 6 percent discount rate is appropriate.a. Should he be willing to sell his future rights now for $240,000?b. Should he be willing to sell his future rights now for $240,000, if payments will be
Carrie Tune will receive $18,000 a year for the next 20 years as payment for a song she has just written. If a present 10 percent discount rate is applied,a. Should she be willing to sell out her future rights now for $160,000?b. Would she be willing to sell her future rights now for $160,000, if
"Red" Herring will receive $11,000 a year for the next 18 years as a result of his patent. At present, 9 percent is an appropriate discount rate.a. Should he be willing to sell out his future rights now for $100,000?b. Would he be willing to sell his future rights now for $100,000, if the payments
Delia has a choice between $30,000 in 50 years or $650 today. If long-term rates are 8 percent, what should be her choice?
You invest a single amount of $20,000 for 6 years at 7 percent. At the end of 6 years you take the proceeds and invest them for 8 years at 10 percent. How much will you have after 14 years?
Rework the previous problem, assuming that the $8,000 per period is received at the beginning of each year.Previous ProblemIf you invest $8,000 per period for the following number of periods, how much would you have?a. 10 years at 5 percentb. 20 years at 9 percentc. 35 periods at 11 percent
If you invest $8,000 per period for the following number of periods, how much would you have?a. 10 years at 5 percentb. 20 years at 9 percentc. 35 periods at 11 percent
How much would you have to invest today to receivea. $12,000 in 6 years at 12 percent?b. $15,000 in 15 years at 8 percent?c. $5,000 each year for 10 years at 8 percent?d. $5,000 each year, at the beginning, for 10 years at 8 percent?e. $50,000 each year for 50 years at 7 percent?f. $50,000 each
If you invest $12,000 today, how much will you havea. in 6 years at 7 percent?b. in 15 years at 12 percent?c. in 25 years at 10 percent?d. in 25 years at 10 percent (compounded semiannually)?
What is the present value ofa. $8,000 in 10 years at 6 percent?b. $16,000 in 5 years at 12 percent?c. $25,000 in 15 years at 8 percent?d. $1,000 in 40 years at 20 percent?
Discuss why the compounding of interest within a tax sheltered plan is so effective, as opposed to paying taxes each year.
a. Using the data in the income statement and the balance sheet that follow, compute the company€™s average collection period (ACP) in days. Use a 365-day year when calculating sales per day.b. Compute the cost, as a percent, that the company is paying for not taking the
Vroom Motorcycle Company is borrowing $30,000 from First Prairie Bank. The total interest charge is $9,000. The loan will be paid by making equal monthly payments for the next three years. What is the annual rate of interest on this instlalment loan?
Talmud Book Company borrows $16,000 for 30 days at 9 percent interest. What is the dollar cost of the loan?
Dr. Ruth is going to borrow $5,000 to help write a book. The loan is for one year and the money can either be borrowed at the prime rate or the LIBOR rate. Assume the prime rate is 6 percent and LIBOR 1.5 percent less. Also assume there will be a $40 transaction fee with LIBOR, and that there are
Birthdaybook requires $125,000 to complete a project.a. With a compensating balance requirement of 10%, how much will the firm need to borrow?b. Given your answer to part a and a stated interest rate of 7 percent on the total amount borrowed, what is the annual rate on the $125 ,000 actually being
Randall Corporation plans to borrow $200,000 for one year at 8 percent from the Dominion Trust Company. There is a 20 percent compensating balance requirement. Randall keeps minimum transaction balances of$10,000 in the normal course of business. This idle cash counts toward meeting the
The treasurer of Brandon Blue Sox is seeking a $20,000 loan for 180 days from the Brandon Credit Union. The stated interest rate is 10 percent and there is a 15 percent compensating balance requirement. The treasurer always keeps a minimum of $1,500 in the firm's chequing account. These funds could
Tucker Drilling Corp. plans to borrow $200,000. Northern Dominion Bank will lend the money at one-half of a percentage point over the prime rate of 8 percent and requires an administration fee of 2 percent. There is a 20 percent compensating balance requirement. What is the annual rate of interest?
Your company plans to borrow $5 million for 12 months, and your banker gives you a stated rate of 8 percent interest. You would like to know the annual rate of interest for the following types of loans. (Each of the following parts stands alone.)a. Simple 8 percent interest with a 10 percent

Showing 1100 - 1200 of 1477

Foundations of Financial Management 10th Canadian edition Stanley Block, Geoffrey Hirt, Bartley Danielsen, Doug Short, Michael Perretta - Solutions

Step by Step Answers