Applied Corporate Finance Questions Problems And Making Decisions In The Real World 1st Edition Mark K. Pyles - Solutions

Unlock the potential of your learning with our comprehensive resource for "Applied Corporate Finance: Questions, Problems, and Making Decisions in the Real World" by Mark K. Pyles. Dive into expertly crafted solutions with our solution manual, offering step-by-step answers and solved problems. Access the answers key and solutions PDF for a thorough understanding of complex concepts. Enhance your study with our test bank, chapter solutions, and instructor manual, ensuring a robust grasp of the textbook material. Benefit from free download options and explore questions and answers tailored to your needs, all available online for seamless learning.

Repeat the analysis from parts a and b in Problem 34 using Starbucks Corporation (SBUX) instead. Specifically, use Starbucks’ 2012 fiscal data, filed in September 2012. Based on the DuPont Identity, what explains the difference between the two firms’ ROEs?
Some balance sheet information is shown here (all values in millions of dollars) (see MyFinanceLab for the data in Excel format):a. What change in the book value of the company’s equity took place at the end of 2012?b. Is the company’s market-to-book ratio meaningful? Is its book debt-equity
Find online the annual report for Green Mountain Coffee Roasters (GMCR) for 2012, filed in September 2012.a. Which auditing firm certified the financial statements?b. Which officers of Green Mountain certified the financial statements?
This is your second interview with a prestigious brokerage firm for a job as an equity analyst. You survived the morning interviews with the department manager and the vice president of equity. Everything has gone so well that they want to test your ability as an analyst. You are seated in a room
Define compounding and discounting.
You have $500 and a bank is offering 8% interest on deposits. If you deposit the money in the bank, how much will you have in one year?
You expect to have $1,100 in one year. A bank is offering loans at 10% interest per year. How much can you borrow today?
Suppose you invest $25,000 in an account paying 9% interest per year.a. What is the balance in the account after 5 years? How much of this balance corresponds to “interest on interest”?b. What is the balance in the account after 25 years? How much of this balance corresponds to “interest on
Calculate the future value of $3,000 ina. 5 years at an interest rate of 8% per year.b. 10 years at an interest rate of 8% per year.c. 5 years at an interest rate of 16% per year.*d. Why is the amount of interest earned in part (a) less than half the amount of interest earned in part (b)?
What is the present value of $12,000 receiveda. 6 years from today when the interest rate is 5% per year?b. 12 years from today when the interest rate is 8% per year?c. 20 years from today when the interest rate is 10% per year?
Your brother has offered to give you either $$15,000$ today or $$20,000$ in 12 years. If the interest rate is 8% per year, which option is preferable?
Your daughter is three years old now and will be going to college in 15 years. You would like to have $$450,000$ in a savings account to fund her education at that time. If the account promises to pay a fixed interest rate of 4% per year, how much money do you need to put into the account today
You are thinking of retiring. Your retirement plan will pay you either $$320,000$ immediately on retirement or $$530,000$ ten years after the date of your retirement. Which alternative should you choose if the interest rate isa. 0% per year?b. 20% per year?c. 8% per year?
You are planning to invest $85,000 in an account earning 7% per year for retirement.a. If you put the $85,000 in an account at age 25, and withdraw it 40 years later, how much will you have?b. If you wait 10 years before making the deposit, so that it stays in the account for only 30 years, how
Your grandfather put some money in an account for you on the day you were born. You are now 18 years old and are allowed to withdraw the money for the first time. The account currently has $20,000 in it and pays an 8% interest rate.a. How much money would be in the account if you left the money
What is the intuition behind the fact that an infinite stream of cash flows has a finite present value?
Why would you prefer to keep the amount you could spend on the lottery rather than possibly double the amount through the draw?
You plan to deposit $800 in a bank account now and $600 at the end of one year. If the account earns 5% interest per year, what will the balance be in the account right after you make the second deposit?
You have just received a windfall from an investment you made in a friend’s business. She will be paying you $10,000 at the end of this year, $20,000 at the end of next year, and $30,000 at the end of the year after that (three years from today). The interest rate is 3.5% per year.a. What is the
You want to endow a scholarship that will pay $5,000 per year forever, starting one year from now. If the school’s endowment discount rate is 6%, what amount must you donate to endow the scholarship?
How would your answer to Problem 12 change if you endow it now, but it makes the first award to a student 10 years from today?
You figure that the total cost of college will be $100,000 per year 18 years from today. If your discount rate is 8% compounded annually, what is the present value today of four years of college costs starting 18 years from today?
Assume that Social Security promises you $40,000 per year starting when you retire 45 years from today (the first $40,000 will be paid 45 years from now). If your discount rate is 7%, compounded annually, and you plan to live for 15 years after retiring (so that you will receive a total of 16
You are trying to decide how much to save for retirement. Assume you plan to save $5000 per year with the first investment made one year from now. You think you can earn 10% per year on your investments and you plan to retire in 43 years, immediately after making your last $5000 investment.a. How
You are thinking about buying a savings bond. The bond costs $100 today and will mature in 10 years with a value of $200. What annual interest rate will the bond earn?
You have an investment account that started with $2,000 ten years ago and which now has grown to $10,000.a. What annual rate of return have you earned (you have made no additional contributions to the account)?b. If the savings bond earns 12% per year from now on, what will the account’s value be
You have an investment opportunity that requires an initial investment of $15,000 today and will pay $20,000 in one year. What is the rate of return of this opportunity?
You have decided to buy a perpetual bond. The bond makes one payment at the end of every year forever and has an interest rate of 8%. If the bond initially costs $500, what is the payment every year?
You are thinking of purchasing a house. The house costs $3,500,000. You have $500,000 in cash that you can use as a down payment on the house, but you need to borrow the rest of the purchase price. The bank is offering a 20-year mortgage that requires annual payments and has an interest rate of 5%
You are saving for retirement. To live comfortably, you decide you will need to save $2 million by the time you are 65.Today is your 22nd birthday, and you decide, starting today and continuing on every birthday up to and including your 65th birthday, that you will put the same amount into a
You receive a $10,000 check from your grandparents for graduation. You decide to save it toward a down payment on a house. You invest it earning 10% per year and you think you will need to have $20,000 saved for the down payment. How long will it be before the $10,000 has grown to $20,000?
A local bank is running the following advertisement: “For just $1000 we will pay you $100 forever!” The fine print says that for a $1000 deposit, the bank will pay $100 every year in perpetuity, starting one year after the deposit is made. What interest rate is the bank advertising (what is the
You are thinking of making an investment in a new factory. The factory will generate revenues of $1 million per year for as long as you maintain it. You expect that the maintenance costs will start at $50,000 per year and will increase 5% per year thereafter. Assume that all revenue and maintenance
What is the difference between annual percentage rate and effective annual rate?
Can the nominal interest rate available to an investor be negative? (Hint Consider the interest rate earned from saving cash “under the mattress.”) Can the real interest rate be negative?
How do interest rates represent the opportunity cost of using money now?
You have been offered a job with an unusual bonus structure. As long as you stay with the firm, you will get an extra $50,000 every six years, starting six years from now. What is the present value of this incentive if you plan to work for the company for a total of 48 years and the interest rate
Suppose the interest rate is 12% APR with monthly compounding. What is the present value of an annuity that pays $500 every four months for ten years?
You make monthly payments on your car loan. It has a quoted APR of 8% (quarterly compounding). What percentage of the outstanding principal do you pay in interest each month?
Suppose Capital One is advertising a 20-month, 6% APR motorcycle loan. If you need to borrow $12,000 to purchase your dream Harley-Davidson, what will your monthly payment be?
You have just taken out a $28,000 car loan with a 12% APR, compounded monthly. The loan is for eight years. When you make your first payment in one month, how much of the payment will go toward the principal of the loan and how much will go toward interest?
In 2010, interest rates were 6.85% and the rate of inflation was 15.3% in the Virgin Islands. What was the real interest rate in 2010? How would the purchasing power of your savings have changed over the year?
If the rate of inflation is 8%, what nominal interest rate is necessary for you to earn a 2% real interest rate on your investment?
Assume the inflation rate is 5% APR, compounded annually. Would you rather earn a nominal return of 8% APR, compounded semiannually, or a real return of 4% APR, compounded quarterly?
You are pleased to see that you have been given a 7% raise this year. However, you read on the Wall Street Journal Web site that inflation over the past year has been 3%. How much better off are you in terms of real purchasing power?
Which has greater interest rate risk, a 20-year U.S. Treasury bond or a 20-year BB corporate bond?
Explain the relationship between interest rates and bond prices.
What is the risk-free interest rate for a five-year maturity?The current zero-coupon yield curve for risk-free bonds is as follows: Maturity (years) YTM 3 4 5 8.23% 8.50% 8.67% 8.95% 9.05%
In the Global Financial Crisis box in Section 6.2, Bloomberg.com reported that the three-month Treasury bill sold for $100.002556 per $100 face value. What is the yield to maturity of this bond, expressed as an EAR?
Suppose a 10-year, $1000 bond with an 8% coupon rate and semiannual coupons is trading for $1034.74.a. What is the bond’s yield to maturity (expressed as an APR with semiannual compounding)?b. If the bond’s yield to maturity changes to 9% APR, what will the bond’s price be?
Suppose a seven-year, $1,000 bond with annual coupons has a price of $930 and a yield to maturity of 8%. What is the bond’s coupon rate?
Suppose a five-year, $1,000 bond with a 10% coupon rate and semiannual coupons is trading with a yield to maturity of 8.5%.a. Is this bond currently trading at a discount, at par, or at a premium? Explain.b. If the yield to maturity of the bond rises to 9% (APR with semiannual compounding), what
What was the price of this bond when it was issued?Suppose that General Motors Acceptance Corporation issued a bond with 10 years until maturity, a face value of $1000, and a coupon rate of 7% (annual payments). The yield to maturity on this bond when it was issued was 6%.
Assuming the yield to maturity remains constant, what is the price of the bond immediately before it makes its first coupon payment?Suppose that General Motors Acceptance Corporation issued a bond with 10 years until maturity, a face value of $1000, and a coupon rate of 7% (annual payments). The
Assuming the yield to maturity remains constant, what is the price of the bond immediately after it makes its first coupon payment?Suppose that General Motors Acceptance Corporation issued a bond with 10 years until maturity, a face value of $1000, and a coupon rate of 7% (annual payments). The
Your company currently has $1000 par, 6% coupon bonds with 10 years to maturity and a price of $1078. If you want to issue new 10-year coupon bonds at par, what coupon rate do you need to set? Assume that for both bonds, the next coupon payment is due in exactly six months.Suppose that General
Suppose you purchase a 10-year bond with 6% annual coupons. You hold the bond for four years, and sell it immediately after receiving the fourth coupon. If the bond’s yield to maturity was 5% when you purchased and sold the bond, what cash flows will you pay and receive from your investment in
What is the percentage change in the price of each bond if its yield to maturity falls from 6% to 5%?Consider the following bonds. Bond Coupon Rate (annual payments) Maturity (years) A 0% B 0% C 4% D babad 8% 5050 15 10 15 10
Which of the bonds A-D is most sensitive to a 1% drop in interest rates from 6% to 5% and why? Which bond is least sensitive? Provide an intuition explanation for your answer.Consider the following bonds. Bond Coupon Rate (annual payments) Maturity (years) A 0% B 0% C 4% D babad 8% 5050 15 10 15 10
Suppose you purchase a 30-year, zero-coupon bond with a yield to maturity of 6%.You hold the bond for five years before selling it.a. If the bond’s yield to maturity is 6% when you sell it, what is the annualized rate of return of your investment?b. If the bond’s yield to maturity is 7% when
HMK Enterprises would like to raise $10 million to invest in capital expenditures. The company plans to issue five-year bonds with a face value of $1000 and a coupon rate of 6.5% (annual payments). The following table summarizes the yield to maturity for five-year (annual-pay) coupon corporate
A BBB-rated corporate bond has a yield to maturity of 8.5%. A U.S. Treasury security has a yield to maturity of 6.8%. These yields are quoted as APRs with semiannual compounding. Both bonds pay semiannual coupons at a rate of 5% and have eight years to maturity.a. What is the price (expressed as a
Why does the stock value depend on its dividends?
Is it true that according to the constant dividend growth model the growth rates in dividends and in the stock price are the same?
What is a limited company? How does it differ from a limited partnership?
What Is the goal of the firm?
What are the main differences between the NYSE and NASDAQ?
You are a shareholder in a corporation. The corporation earns $5.00 per share before taxes. After it has paid taxes, it will distribute the rest of its earnings to you as a dividend. The dividend Is income to you, so you will then pay taxes on these earnings. The corporate tax rate is 40% and your
Rework Example 1.1, assuming the corporation in that example has elected subchapter S tax treatment and your tax rate on non-dividend income is 30%.
Explain the difference between an S and a C corporation in the United States.
What is the difference between a public and a private company?
The following quote on Yahoo! stock appeared on July 10, 2013, on Yahoo! Finance:If you wanted to buy Yahoo!, what price would you pay per share? How much would you receive per share if you wanted to sell Yahoo!? YAHOO! FINANCE HOME Lock Up Dow +0.50% Nasdaq +0.50% More On YHOO QUOTES INVESTING
What are the main financial statements that all public companies must produce?
What is dilution?
What does a high debt-to-equity ratio tell you?
Tequila Crisis (B) (web exercise). Log in to IMF International Financial Statistics to present and analyze Mexico’s current account over the period 1992–1996.Break down your analysis among merchandise trade, services, net income, and transfers. Link your interpretation to the discussion of
Tequila Crisis (C) (web exercise). Log in to IMF International Financial Statistics to present and analyze Mexico’s capital account over the period 1992–1996. How can you reconcile your findings with the discussion of problems #11 and #12?
Tequila Crisis (D) (web exercise). Log in to IMF International Financial Statistics to present and analyze Mexico’s official reserve account over the period 1992–1996. What can you infer about Mexico’s central bank activities during that period? Was Mexico’s balance of payments indeed
What is the carry trade?
Why is hedging value-creating?
What are market-based forecasts?
Sarbanes-Oxley What is the motivation behind the legislation? What does its implementation mean to publicly held corporations?
Initial public offerings Discuss the paperwork that is involved in an IPO. What is included in each and what purpose does it serve?
Goal of the firm Name at least four other potential goals of the firm and discuss what those goals lack in relation to the true goal.
Director voting What is the primary difference between cumulative and straight voting? How does this affect minority shareholder participation?
Capital budgeting, capital structure, and working capital management Suppose you are the CFO for a pencil-making firm that is in need of a new machine. Discuss the basic steps that you must go through to make this happen.Discuss each of the three aspects and the decisions that must be made for each
Corporations Name at least two advantages associated with a corporation.What are the primary disadvantages?
Sole proprietorships and partnerships What are the primary disadvantages to both the sole proprietorship and partnership forms of business organizations?What are potential benefits?
Agency problems Bob Thomas is the manager of MLP, Inc., a publicly traded firm. Last year, he chose to forego a valuable project so he could give himself a larger bonus. What did Bob create? How do you think issues such as Bob’s selfishness at the expense of shareholders can be mitigated?
Agency problems Publicly traded companies are likely to have many different owners. Private companies, however, have relatively few owners. Does this mean that agency problems do not exist for privately held corporations? If so, why? If not, give specific examples of how agency problems could occur
Primary markets What is the difference between primary and secondary markets? Give an example of each.
Initial public offerings What are the primary “ingredients” in the IPO process?Describe each in detail.
Venture capital and underwriters Describe two financial intermediaries that often help the issuing firms in the going-public process. What roles do each play?
Initial public offerings Johnny Quickset sits three seats across from you in finance class. After class he approached you and asked the following question:“How do underwriters make money?” How do you answer that question?
Lockup agreement Scotty Blow’s lamp store went public on July 14, 2010.Three weeks later, Scotty sold 47 % of his shares for a profit of $2 million. Why is this a bad thing? Discuss the mechanism designed to eliminate this type of activity.
Goal of the firm What is the only appropriate goal of the firm? Why?
Goal of the firm and agency problems Suppose the CEO of a Fortune 500 firm superficially inflates year-end earnings reports to increase his bonus.What is this an example of? How does this influence the goal of the firm?
Proxy voting Discuss how proxy voting affects shareholder influence over the ownership structure. What potential benefits of proxy voting come to mind?Can you think of any potential disadvantages?
Capital budgeting How important is capital budgeting in corporate finance?What types of issues have to be addressed in capital budgeting?
Capital structure How important is capital structure in corporate finance?What types of issues have to be addressed in capital structure?

Showing 2500 - 2600 of 5445

First
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
Last

Applied Corporate Finance Questions Problems And Making Decisions In The Real World 1st Edition Mark K. Pyles - Solutions

Step by Step Answers