In working this problem set pay close attention to the instructions. Remember, this is an\ individual assignment. This assignment does not need to be typed; however, it is very\ important that you organize your answers clearly and legibly. Since I give partial credit,\ it is imperative that you show your work in a logical manner.\ The due date of this assignment is 3/9/2024 at 11:59 pm. You can deliver this\ assignment through Assignment on Canvas. Sending it to me through Universitys\ email is another possibility but not encouraged. After the due date, I will be posting the\ solutions in Canvas, and once graded, I will be posting your grade in the grade book.\ This problem set is worth 10 points in your final grade.\ 1. (10 percent) Wukong Inc. recently reported operating income (EBIT) of $3.75 million, depreciation of\ $1.40 million, and had a tax rate of 30%. The firms expenditures on fixed assets and net operating working\ capital totaled $0.8 million. How much was its free cash flow, in millions?\ 2.(10 percent) Frank Inc has the following balance sheet and income statement data:\ The new CFO thinks that inventories are excessive and could be lowered sufficiently to cause the current\ ratio to equal the industry average, 3.00, without affecting either sales or net income. Assuming that\ inventories are sold off and not replaced to get the current ratio to the target level, and that the funds\ generated are used to buy back common stock at book value, by how much would the ROE change? Do not\ round your intermediate calculations.\ 3. (10 percent) Alan and Sara Smith are a married couple who file a joint income tax return. They have two\ children, and they have legitimate itemized deductions totaling $25,600. Their total income from wages is\ $378,600. Assume the following tax table is applicable:\ Married Couples Filing Joint Returns\ Cash $14,000 Accounts payable $42,000\ Receivables 70,000 Other current liabilities 28,000\ Inventories 260,000 Total CL $70,000\ Total CA $344,000 Long-term debt 160,000\ Net fixed assets 146,000 Common equity 260,000\ Total assets $490,000 Total liab. and equity $490,000\ Sales $280,000\ Net income 21,000\ What is their federal tax liability? Based on the information given above, what is the average tax rate for\ Alan and Sara Smith?\ 4. (10 Percent) CCC Bank pays a 5.60% nominal rate on deposits, with daily compounding. What effective\ annual rate (EAR%) does the bank pay?\ 5. (10 Percent) Find the NPV of a ten-year project which costs $25,000 and provides cash flows of $4,500\ per year the first 5 years, and $4,000 per year the next 5 years. Assume a 10.5% rate of return and annual\ compounding?\ 6. (10 Percent) Assume that you have purchased a new car and after your down payment, you borrowed\ $20,000 from a bank to pay for the car. Also assume that you have agreed to pay off this loan by making\ equal monthly payments for 5 years. Given that the annual interest rate is 10.5%, how much will be the\ payment each month? How much will be the payment if you want to pay all the rest of the loan at once at\ the beginning of third year?\ 7. (10 Percent) Lee Corp.'s 5-year bonds yield 7.80% and 5-year T-bonds yield 5.20%. The real risk-free\ rate is r* = 2.5%, the inflation premium for 5-year bonds is IP = 1.50%, the default risk premium for Lee's\ bonds is DRP = 1.50% versus zero for T-bonds, and the maturity risk premium for all bonds is found with\ the formula MRP = (t 1)\\\\times 0.3%, where t = number of years to maturity. What is the liquidity premium\ (LP) on Kay's bonds?\ 8. (15 Percent) Tom Corp.'s bonds currently sell for $1,005 with a 7.5% coupon paid semiannually and a\ 15-year maturity. However, the bonds can be called in 6 years at $1,035. Assume that no costs other than\ the call premium would be incurred to call and refund the bonds, and also assume that the yield curve is\ horizontal, with rates expected to remain at current levels on into the future. Under these conditions, what\ rate of return (annual) should an investor expect to earn if he or she purchases these bonds?\ 9. (15 Percent) Suppose you purchased a 20-year treasury bond with a 6% annual coupon ten years ago at\ par value. Today the bond's yield to maturity has changed to 5.5%.\ a. What's your rate of return if you hold this bond till maturity?\ b. If you sell this bond now, what will be the internal rate of return you will earn on your\ investment?\ c. Should you hold it to maturity or sell it now? Why?\ If Your Taxable\ Income Is\ You Pay This\ Amount on the\ Base of the Bracket\ Plus This Percentage\ on the Excess over the\ Base\ Average Tax\ Rate at\ Top of Bracket\ Up to $19,050 $0.00 10.0% 10.0%\ $19,050-$77,400 1,905.00 12.0 11.5\ $77,400-$165,000 8,907.00 22.0 17.1\ $165,000-$315,000 28,179.00 24.0 20.4\ $315,000-$400,000 64,179.00 32.0 22.8\ $400,000-$600,000 91,379.00 35.0 26.9\ Over $600,000 161,379.00 37.0 37.0