Please show work in excel with appropriate formulas (Please do not just copy/paste in cells) Thank you

Page 1 of 5 Date: 11/7/16 Course: Managerial Finance Week3 Problem Set 1. Your bank is offering you an account that will pay 18% interest in total for a two-year deposit. Determine the equivalent discount rate for a period length of: a. Six months. b. One year. c. One month. a. Six months. The equivalent discount rate for a period length of six months is %. (Round to two decimal places.) b. One year. The equivalent discount rate for a period length of one year is %. (Round to two decimal places.) c. One month. The equivalent discount rate for a period length of one month is %. (Round to two decimal places.) 2. Which do you prefer: a bank account that pays 10% per year (EAR) for three years or: a. An account that pays 5% every six months for three years? b. An account that pays 15% every 18 months for three years? c. An account that pays 1% per month for three years? a. An account that pays 5% every six months for three years? If you deposit $1 into a bank account that pays 10% per year for three years, you will have $ . (Round to five decimal places.) If you deposit $1 into a bank account that pays 5% every six months for three years, the amount you will receive after three years is $ . (Round to five decimal places.) Therefore, you will prefer: (1) . (Select from the drop-down menu.) b. An account that pays 15% every 18 months for three years? Therefore, you will prefer: (3) (1) 5% every six months for three years 10% per year for three years (3) 1 % every month for three years . (Select from the drop-down menu.) (2) 15% every 18 months for three years 10% per year for three years 10 % per year for three years 11/5/2016 Page 2 of 5 If the account pays 15% every 18 months for three years, the amount you will receive after three years is $ . (Round to five decimal places.) Therefore, you will prefer: (2) . (Select from the drop-down menu.) c. An account that pays 1% per month for three years? If the account pays 1% every month for three years, the amount you will receive after three years is $ . (Round to five decimal places.) 3. You have found three investment choices for a one-year deposit: 9 % APR compounded monthly, 10% APR compounded annually, and 10% APR compounded daily. Compute the EAR for each investment choice. (Assume that there are 365 days in the year.) For the case of 9% APR compounded monthly the EAR is %. (Round to three decimal places.) For the case of 10% APR compounded annually the EAR is %. (Round to three decimal places.) For the case of 10% APR compounded daily the EAR is %. (Round to three decimal places.) 4. A 5-year bond with a face value of $1,000 has a coupon rate of 4 .50%, with semiannual payments. a. What is the coupon payment for this bond? b. Enter the cash flows for the bond on a timeline. a. What is the coupon payment for this bond? The coupon payment for this bond is $ . (Round to the nearest cent.) b. Enter the cash flows for the bond on a timeline. Cash Flow Amount (Round to the nearest cent.) CF1 $ CF2 $ CF9 $ CF10 $ 5. Suppose a 10-year, $1,000 bond with a 7% coupon rate and semiannual coupons is trading for a price of $1,1 16.68. 1 . Suppose a 5-year, $1,000 bond with annual coupons has a price of $9 00 and a yield to maturity of 6%. What is the bond's coupon rate? 11/5/2016 Page 3 of 5 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 10% APR, what will the bond's price be? a. What is the bond's yield to maturity (expressed as an APR with semiannual compounding)? The YTM is %. (Round to two decimal places.) b. If the bond's yield to maturity changes to 10% APR, what will the bond's price be? The price is $ . (Round to the nearest cent.) The coupon rate is 7. %. (Round to two decimal places.) The prices of several bonds with face values of $1,000 are summarized in the following table: Bond A Price B $811.01 $1,069 .32 C D $1,169 .16 $1,000.00 For each bond, provide an answer for whether it trades at a discount, at par, or at a premium. Bond A trades at (a) (1) . (Select from the drop-down menu.) Bond B trades at (a) (2) . (Select from the drop-down menu.) Bond C trades at (a) (3) . (Select from the drop-down menu.) Bond D trades at (a) (4) . (Select from the drop-down menu.) (1) discount par premium 8. (2) discount par premium (3) discount par premium (4 ) discount par premium Suppose a seven-year, $1,000 bond with a 7.4 7% coupon rate and semiannual coupons is trading with a yield to maturity of 5.21%. a. Is this bond currently trading at a discount, at par, or at a premuim? Explain. 11/5/2016 Page 4 of 5 b. If the yield to maturity of the bond rises to 6.07% (APR with semiannual compounding), at what price will the bond trade? a. Is this bond currently trading at a discount, at par, or at a premuim? Explain. The bond is currently trading... (Select the best choice below.) A. ... at a premium because the coupon rate is greater than the yield to maturity B. ... at a discount because the coupon rate is greater than the yield to maturity C. ... at a premium because the yield to maturity is greater than the coupon rate. D. ... at par because the coupon rate is equal to the yield to maturity b. If the yield to maturity of the bond rises to 6.07% (APR with semiannual compounding), at what price will the bond trade? The bond will trade for $ 9. . (Round to two decimal places.) Assume Evco, Inc., has a current stock price of $4 9 and will pay a $1.9 0 dividend in one year; its equity cost of capital is 12%. What price must you expect Evco stock to sell for immediately after the firm pays the dividend in one year to justify its current price? The expected price is $ . (Round to the nearest cent.) 10. Anle Corporation has a current price of $26, is expected to pay a dividend of $1 in one year, and its expected price right after paying that dividend is $27. a. What is Anle's expected dividend yield? b. What is Anle's expected capital gain rate? c. What is Anle's equity cost of capital? a. What is Anle's expected dividend yield? Anle's expected dividend yield is %. (Round to two decimal places.) b. What is Anle's expected capital gain rate? Anle's expected capital gain rate is %. (Round to two decimal places.) c. What is Anle's equity cost of capital? Anle's equity cost of capital is %. (Round to two decimal places.) 11/5/2016 Page 5 of 5 11. Summit Systems will pay a dividend of $1.51 one year from now. If you expect Summit's dividend to grow by 5.6% per year, what is its price per share if its equity cost of capital is 10.6%? The price per share is $ . (Round to the nearest cent.) 12. Colgate-Palmolive Company has just paid an annual dividend of $1.05. Analysts are predicting a(n) 10.8% per year growth rate in earnings over the next five years. After that, Colgate's earnings are expected to grow at the current industry average of 5.5% per year. If Colgate's equity cost of capital is 8.4 % per year and its dividend payout ratio remains constant, what price does the dividend-discount model predict Colgate stock should sell for? The price per share is $ . (Round to two decimal places.) 11/5/2016 1. Your bank is offering you an account that will pay 18% interest in total for a twoyear deposit. Determine the equivalent discount rate for a period length of a. Six months b. One year. c. One month. 4.22% 8.63% 0.69% 2. Which do you prefer: a bank account that pays 10% per year (EAR) for three years or: a. An account that pays 5% every six months for three years? b. An account that pays 15% every 18 months for three years? c. An account that pays 1% per month for three years? a b c bank account that pays 10% per year (EAR) for three years An account that pays 5% every six months for three years An account that pays 15% every 18 months for three years An account that pays 1% per month for three years the amount you will receive after three 1.33100 1.34010 1.10250 1.43077 Therefore, you will prefer 1 5% every six months for three years 2 10% per year for three years 3 1% every month for three years 3. You have found three investment choices for a one-year deposit: 9 % APR compounded monthly, 10% APR compounded annually, and 10% APR compounded daily. Compute the EAR for each investment choice. (Assume that there are 365 9 % APR compounded monthly 10% APR compounded annually 10% APR compounded daily 9.381% 10.000% 10.516% 4. A 5-year bond with a face value of $1,000 has a coupon rate of 4 .50%, with semiannual payments. a. What is the coupon payment for this bond a. What is the coupon payment for this bond? b. Enter the cash flows for the bond on a timeline 22.5 CF1 22.5 5. Suppose a 10-year, $1,000 bond with a 7% coupon rate and semiannual coupons is trading for a price of $1,1 6.68. 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 10% APR, what will the bond's price be? bond's yield to maturity If the bond's yield to maturity changes to 10% APR, what will the bond's price be 4.87% $813.07 6 Suppose a 5-year, $1,000 bond with annual coupons has a price of $9 00 and a yield to maturity of 6%. What is the bond's coupon rate? 3.63% b. If the bond's yield to maturity changes to 10% APR, what will the bond's price be $758.38 The coupon rate is 3.63% 7. The prices of several bonds with face values of $1,000 are summarized in the following table Bond A B C D 8. Suppose a seven-year, $1,000 bond with a 7.4 7% coupon rate and semiannual coupons is trading with a yield to maturity of 5.21%. A. ... at a premium because the coupon rate is greater than the yield to maturity trade $1,078.88 9. Assume Evco, Inc., has a current stock price of $4 9 and will pay a $1.9 0 dividend in one year; its equity cost of capital is 12%. What price must you expect Evco stock to sell for immediately after the firm pays the dividend in one year to justify its current price? 49=1.90+x/(1.12) 52.98 Discount Premium Premium Par 10. Anle Corporation has a current price of $26, is expected to pay a dividend of $1 in one year, and its expected price right after paying that dividend is $27. What is Anle's expected dividend yield What is Anle's expected capital gain rate What is Anle's equity cost of capital 3.85% 3.85% 7.69% 11. Summit Systems will pay a dividend of $1.51 one year from now. If you expect Summit's dividend to grow by 5.6% per year, what is its price per share if its equity cost of capital is 10.6%? price per share 30.20 12. Colgate-Palmolive Company has just paid an annual dividend of $1.05. Analysts are predicting a(n) 10.8% per year growth rate in earnings over the next five years. After that, Colgate's earnings are expected to grow at the current industry average of 5.5% per year. If Colgate's equity cost of capital is 8.4 % per year and its dividend payout ratio remains constant, what price does the dividenddiscount model predict Colgate stock should sell for? Year Dividend 1 2 3 4 5 6 6 Price 1.16 1.29 1.43 1.58 1.75 1.85 67.30 CF2 CF 9 22.5 22.5 CF 10 1022.5 maturity of 6%. PV factor PV Value 0.922509 1.07 0.851023 1.10 0.785077 1.12 0.724241 1.15 0.668119 1.17 0.616346 1.14 0.616346 41.48 48.23 Purchase requests (PRs) from operating departments are authorized by the appropriate person in the requesting department The purchasing clerk verifies that there is a signature on the PR and then issues a prenumbered purchase order (PO) for the items required. The purchasing clerk retains copies of the PR and the PO and files them The Purchasing Manager reviews Purchase Order to see whether the Purchase Request is authorized, and if so, approves it and forwards it to the Buyer. The Buyer must select a vendor from a pre-approved list for all Purchase Orders over $5,000. or POs under $5,000 the Buyer can select any vendor The receiver who accepts the goods into the warehouse verifies that the quantity received matches the bill of lading (BL) and signs on behalf of Integrated Measurement Systems for receipt of the goods listed on the BL. If there is a discrepancy in the quantity received, the receiver does not sign the BL; the BL is sent to the buyer to resolve the problem with the vendor. The purchasing clerk matches the signed BL with the filed copies of the PO and PR. Type of control Control objective Authorization procedures Authorization documentation and records created to support transaction completeness, accuracy authorizaTon is veriFed independently by segregaTion of duTies Authorization authorizaTon control procedure to ensure company authorizaTion, validity is receiving the best price and suppliers are at arm's length from Buyer documents and records are used to record transacTon informaTon and allow for independent veriFcaTon accuracy, completeness documents and records to allow independent verifcation oF details Objecve: accuracy, completeness accuracy, completeness test of controls examine the PR documents to verify they have been signed examine the PR/PO documents to verify they match test numerical conTnuity examine the PR documents to verify they have been approved by Purchasing Manager examine the PO documents to verify those over $5000 are sent to a preauthorized vendor, scruTnize POs for signs the Buyer is sending these disproporTonately to certain vendors, enquire of Purchasing Manager and Buyer about preauthorized vendors to assess their validity examine the BL documents for evidence of quanTiTies being veriFed, follow up of documents showing discrepancies to verify they have been signed for approval examine the PO/PR documents to veriFy they agree to BL 1. Your bank is offering you an account that will pay 18% interest in total for a twoyear deposit. Determine the equivalent discount rate for a period length of a. Six months b. One year. c. One month. 4.22% 8.63% 0.69% 2. Which do you prefer: a bank account that pays 10% per year (EAR) for three years or: a. An account that pays 5% every six months for three years? b. An account that pays 15% every 18 months for three years? c. An account that pays 1% per month for three years? a b c bank account that pays 10% per year (EAR) for three years An account that pays 5% every six months for three years An account that pays 15% every 18 months for three years An account that pays 1% per month for three years the amount you will receive after three 1.33100 1.34010 1.10250 1.43077 Therefore, you will prefer 1 5% every six months for three years 2 10% per year for three years 3 1% every month for three years 3. You have found three investment choices for a one-year deposit: 9 % APR compounded monthly, 10% APR compounded annually, and 10% APR compounded daily. Compute the EAR for each investment choice. (Assume that there are 365 9 % APR compounded monthly 10% APR compounded annually 10% APR compounded daily 9.381% 10.000% 10.516% 4. A 5-year bond with a face value of $1,000 has a coupon rate of 4 .50%, with semiannual payments. a. What is the coupon payment for this bond a. What is the coupon payment for this bond? b. Enter the cash flows for the bond on a timeline 22.5 CF1 22.5 5. Suppose a 10-year, $1,000 bond with a 7% coupon rate and semiannual coupons is trading for a price of $1,1 6.68. 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 10% APR, what will the bond's price be? bond's yield to maturity If the bond's yield to maturity changes to 10% APR, what will the bond's price be 4.87% $813.07 6 Suppose a 5-year, $1,000 bond with annual coupons has a price of $9 00 and a yield to maturity of 6%. What is the bond's coupon rate? 3.63% b. If the bond's yield to maturity changes to 10% APR, what will the bond's price be $758.38 The coupon rate is 3.63% 7. The prices of several bonds with face values of $1,000 are summarized in the following table Bond A B C D 8. Suppose a seven-year, $1,000 bond with a 7.4 7% coupon rate and semiannual coupons is trading with a yield to maturity of 5.21%. A. ... at a premium because the coupon rate is greater than the yield to maturity trade $1,078.88 9. Assume Evco, Inc., has a current stock price of $4 9 and will pay a $1.9 0 dividend in one year; its equity cost of capital is 12%. What price must you expect Evco stock to sell for immediately after the firm pays the dividend in one year to justify its current price? 49=1.90+x/(1.12) 52.98 Discount Premium Premium Par 10. Anle Corporation has a current price of $26, is expected to pay a dividend of $1 in one year, and its expected price right after paying that dividend is $27. What is Anle's expected dividend yield What is Anle's expected capital gain rate What is Anle's equity cost of capital 3.85% 3.85% 7.69% 11. Summit Systems will pay a dividend of $1.51 one year from now. If you expect Summit's dividend to grow by 5.6% per year, what is its price per share if its equity cost of capital is 10.6%? price per share 30.20 12. Colgate-Palmolive Company has just paid an annual dividend of $1.05. Analysts are predicting a(n) 10.8% per year growth rate in earnings over the next five years. After that, Colgate's earnings are expected to grow at the current industry average of 5.5% per year. If Colgate's equity cost of capital is 8.4 % per year and its dividend payout ratio remains constant, what price does the dividenddiscount model predict Colgate stock should sell for? Year Dividend 1 2 3 4 5 6 6 Price 1.16 1.29 1.43 1.58 1.75 1.85 67.30 CF2 CF 9 22.5 22.5 CF 10 1022.5 maturity of 6%. PV factor PV Value 0.922509 1.07 0.851023 1.10 0.785077 1.12 0.724241 1.15 0.668119 1.17 0.616346 1.14 0.616346 41.48 48.23 Purchase requests (PRs) from operating departments are authorized by the appropriate person in the requesting department The purchasing clerk verifies that there is a signature on the PR and then issues a prenumbered purchase order (PO) for the items required. The purchasing clerk retains copies of the PR and the PO and files them The Purchasing Manager reviews Purchase Order to see whether the Purchase Request is authorized, and if so, approves it and forwards it to the Buyer. The Buyer must select a vendor from a pre-approved list for all Purchase Orders over $5,000. or POs under $5,000 the Buyer can select any vendor The receiver who accepts the goods into the warehouse verifies that the quantity received matches the bill of lading (BL) and signs on behalf of Integrated Measurement Systems for receipt of the goods listed on the BL. If there is a discrepancy in the quantity received, the receiver does not sign the BL; the BL is sent to the buyer to resolve the problem with the vendor. The purchasing clerk matches the signed BL with the filed copies of the PO and PR. Type of control Control objective Authorization procedures Authorization documentation and records created to support transaction completeness, accuracy authorizaTon is veriFed independently by segregaTion of duTies Authorization authorizaTon control procedure to ensure company authorizaTion, validity is receiving the best price and suppliers are at arm's length from Buyer documents and records are used to record transacTon informaTon and allow for independent veriFcaTon accuracy, completeness documents and records to allow independent verifcation oF details Objecve: accuracy, completeness accuracy, completeness test of controls examine the PR documents to verify they have been signed examine the PR/PO documents to verify they match test numerical conTnuity examine the PR documents to verify they have been approved by Purchasing Manager examine the PO documents to verify those over $5000 are sent to a preauthorized vendor, scruTnize POs for signs the Buyer is sending these disproporTonately to certain vendors, enquire of Purchasing Manager and Buyer about preauthorized vendors to assess their validity examine the BL documents for evidence of quanTiTies being veriFed, follow up of documents showing discrepancies to verify they have been signed for approval examine the PO/PR documents to veriFy they agree to BL