Question 1:
Tom and Sue's Flowers, Inc.'s, 10-year bonds are currently yielding a return of 8.55 percent. The expected inflation premium is 2.55 percent annually and the real risk-free rate is expected to be 3.55 percent annually over the next 10 years. The default risk premium on Tom and Sue's Flowers' bonds is 0.70 percent. The maturity risk premium is 0.65 percent on 5-year securities and increases by 0.09 percent for each additional year to maturity. Calculate the liquidity risk premium on Tom and Sue's Flowers, Inc.'s, 10-year bonds. (Round your answer to 2 decimal places.)
Liquidity risk premium
Question 2:
Suppose we observe the following rates: 1R1 = 0.75%: 1R2 = 1.20%; and E(2r1) = 0.939%. If the liquidity premium theory of the term structure of risk-free rates holds. what is the liquidity premium for year 2. L2? (Do not round intermediate calculations and round your answer to 3 decimal places.)
Liquidity premium
Question 3:
On March 11, 20XX: the existing or current (spot) 1-: 2-: 3-: and 4-year zero coupon Treasury security rates were as follows:
1R1= 0.70%, 1R2 = 1.30%; 1R3 = 1.70%: 1R4 = 1.86%
Using the unbiased expectations theory: calculate the 1-year forward rates on zero coupon Treasury bonds for years 2, 3 and 4 as of March 11, 20XX. (Do not round intermediate calculations and round your answers to 2 decimal places.)
Question 4:
A client in the 25 percent marginal tax bracket is comparing a municipal bond that offers a 47 percent yield to maturity and a similar-risk corporate bond that offers a 6..55 percent yield.
Determine the equivalent taxable yield. (Round your answer to 2 decimal places.
Equivalent taxable yield
Which bond will give the client more profit after taxes?
Corporate bond
Municipal bond
Question 5:
A 7.60 percent coupon bond with 14 years left to maturity is priced to offer a 8.3 percent yield to maturity. You believe that in one year; the yield to maturity will be 7.9 percent. What is the change in price the bond will experience in dollars? (Do not round intermediate calculations and round your final answer to 2 decimal places.)
Change in bond price ____
Question 6:
A 5.50 percent coupon bond with 18 years left to maturity is offered for sale at $965.82. What yield to maturity is the bond offering? (Assume interest payments are semiannual.) (Round your answer to 2 decimal places.)
Question 7:
A 7.05 percent coupon bond with 17 years left to maturity is offered for sale at $1:045.30. What yield to maturity is the bond offering? (Assume interest payments are semiannual.) (Round your answer to 2 decimal places.)
Yield to maturity
Question 8:
Paychex Inc. (PAYX) recently paid an $0.70 dividend. The dividend is expected to grow at an 11 percent rate. The current stock price is $41.31.
What is the return shareholders are expecting? (Do not round intermediate calculations and round your final answer to 2 decimal places.)
Shareholders return %
Question 9:
New York Times Co. (NYT) recently earned a profit of $2.61 per share and has a PIE ratio of 19.90. The dividend has been growing at a 6.25 percent rate over the past six years.
If this growth rate continues, what would be the stock price in five years if the PIE ratio remained unchanged? What would the price be if the PIE ratio increased to 2E in five years? (Round your answers to 2 decimal places.)
Stock price
Stock price with new PIE
Question 10:
A firm is expected to pay a dividend of $1.45 next year and $1.60 the following year. Financial analysts believe the stock will be at their price target of $45 in two years.
Compute the value of this stock with a required return of 11.4 percent. (Round your answer to 2 decimal places.)
Value of stock
Question 11:
Muffin's Masonry: Inc.'s: balance sheet lists net fixed assets as $34.00 million_ The fixed assets could currently be sold for $59.00 million. Muffin's current balance sheet shows current liabilities of $15.50 million and net working capital of $14.50 million. If all the current accounts were liquidated today: the company would receive $8.25 million cash after paying the $15.50 million in current liabilities.
What is the book value of Muffin's Masonry's assets today and the market value of these assets? (Enter your answers in millions of dollars rounded to 2 decimal places.)
Question 12:
The Dakota Corporation had a 2015 taxable income of $30:000:000 from operations after all operating costs but before (1) interest charges of $9:000:000; (2) dividends received of $830:000; (3) dividends paid of $5:650:000; and (4) income taxes.
a. Use the tax schedule in Table 2.3 to calculate Dakota's income tax liability. (Round your answer to the nearest dollar amount.)
Income tax liability
b. What are Dakota's average and marginal tax rates on taxable income? (Round your answers to the nearest whole percent.)
Average tax rate Marginal tax rate
Question 13:
Dogs 4 U Corporation has net cash flow from financing activities for the last year of $32 million. The company paid $174 million in dividends last year. During the year: the change in notes payable on the balance sheet was $37 million and change in common and preferred stock was $0. The end-of-year balance for long-term debt was $310 million.
Calculate the beginning-of-year balance for long-term debt. (Enter your answer in millions of dollars.)
Long-term debt
Question 14:
Use the balance sheet and income statement below:
VALIUM'S MEDICAL SUPPLY CORPORATION
Balance Sheet as of December 31. 2015 and 2014 (in thousands of dollars)
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2015
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2014
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2015
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2014
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Assets
Current assets:
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|
|
Liabilities and Equity Current liabilities:
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|
|
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Cash and marketable securities
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$ 90
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$ 89
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Accrued wages and taxes
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$ 66
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$ 59
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Accounts receivable
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208
|
199
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Accounts payable
|
168
|
159
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|
Inventory
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330
|
309
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Notes payable
|
149
|
149
|
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Total
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$ 628
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$ 597
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Total
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$ 383
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$ 367
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Fixed assets-
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|
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Long-term debt:
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$ 656
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$ 592
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Gross plant and equipment
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$1.127
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$ 918
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Stockholders' equity:
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Less: Depreciation
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182
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131
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Preferred stock (6 thousand shares)
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$ 6
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$
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|
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Common stock and paid-in surplus
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120
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120
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Net plant and equipment
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$ 945
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$ 787
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(100 thousand shares)
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|
|
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Other long-term assets
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170
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170
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Retained earnings
|
578
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469
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Total
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$1,115
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$ 957
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Total
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$ 704
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$ 595
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Total assets
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$1.743
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$1,554
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Total liabilities and equity
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$1,743
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$1,554
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VALIUM'S MEDICAL SUPPLY CORPORATION
Income Statement for Years Ending December 31. 2015 and 2014 (in thousands of dollars)
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2015
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2014
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Net sales
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$ 928
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$ 838
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Less: Cost of goods sold
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407
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370
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|
Gross profits
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$ 521
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$ 468
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Less: Other operating expenses
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65
|
59
|
|
Earnings before interest, taxes: depreciation:
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|
|
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and amortization (EBITDA)
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$ 456
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$ 409
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Less: Depreciation
|
51
|
49
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Earnings before interest and taxes (EBIT)
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$ 405
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$ 360
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Less: Interest
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66
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60
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Earnings before taxes (EBT)
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$ 339
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$ 300
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Less: Taxes
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149
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129
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|
Net income
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$ 190
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$ 171
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Less: Preferred stock dividends
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|
|
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$ 6
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$ 6
|
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Net income available to common stockholders
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$ 184
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$ 165
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Less: Common stock dividends
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75
|
75
|
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Addition to retained earnings
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$ 109
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$ 90
|
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Per (common) share data:
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|
|
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Earnings per share (EPS)
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$ 1.84
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$ 2
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Dividends per share (DPS)
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$ 0.75
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$ 0.75
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Book value per share (BVPS)
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$ 6.98
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$ 5.89
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Market value (price) per share (MVPS)
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$ 8.01
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$ 6.37
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Prepare a statement of cash flows for Valium's Medical Supply Corporation. (Enter your answers in thous-ands. Amounts to be deducted should be indicated with a minus sign. Leave no cells blank -be certain to enter "0" wherever required.)
Net cash flow from financing activities
Question 15:
Mandesa: Inc.: has current liabilities of $9:500:000, current ratio of 2.0 times: inventory turnover of 12 times: a.vera.ge collection period of 30 days: and credit sales of $63999:995.
Calculate the value of cash and marketable securities. (Use 365 days a year. Round your intermediate calculations and final answer to the nearest dollar amount.)
Cash and marketable securities
Question 16:
Rick's Travel Service has asked you to help piece together financial information on the firm for the most current year. Managers give you the following information: sales are $7.6 million: total debt is $2.7650 million. debt ratio is 50 percent, and ROE is 17.3 percent.
Using the above information. calculate Rick's ROA. (Round your answer to 2 decimal places.)