Financial Management Problems Solved Business Finance Assignment Homework Help

Chapter4 Problems 4 – 8, 4 – 13, & 4 – 21


4– 8

You want to buy a car, and a local bank will lendyou $20,000. The loan would be fully amortized over 5 years (60 months), andthe nominal interest rate would be 12%, with interest paid monthly. What is themonthly loan payment? What is the loan’s EFF%?

4– 13

Find the present value of the following ordinary annuities.

  1. $400per year for 10 years at 10%

  2. $200per year for 5 years at 5%

  3. $400per year for 5 years at 0%

  4. Nowrework parts a, b, and c assuming that payments are made at the beginning ofeach year; that is, they are annuities due.

4– 21

Sales for Hanebury Corporation’s just-ended yearwere $12 million. Sales were $6 million 5 years earlier.

  1. Atwhat rate did sales grow?

  2. Supposesomeone calculated the sales growth for Hanebury in part a as follows: “Salesdoubled in 5 years. This represents a growth of 100% in 5 years; dividing 100%by 5 results in an estimated growth rate of 20% per year.” Explain what iswrong with this calculation.

Chapter5 Problems 5 – 9, 5 – 13

5– 9

The Garraty Company has two bond issues outstanding.Both bonds pay $100 annual interest plus $1,000 at maturity. Bond L has amaturity of 15 years, and Bond S has a maturity of 1 year.

  1. Whatwill be the value of each of these bonds when the going rate of interest is (1)5%, (2) 8%, and (3) 12%? Assume that there is only one more interest payment tobe made on Bond S.

  2. Whydoes the longer-term (15-year) bond fluctuate more when interest rates changethan does the shorter-term bond (1 year)?

5– 13

You just purchased a bond that matures in 5 years.The bond has a face value of $1,000 and has an 8% annual coupon. The bond has acurrent yield of 8.21%. What is the bond’s yield to maturity?

Chapter7 Problem 7 – 17

7– 17

Kendra Enterprises has never paid a dividend. Freecash flow is projected to be $80,000 and $100,000 for the next 2 years,respectively; after the second year, FCF is expected to grow at a constant rateof 8%. The company’s weighted average cost of capital is 12%.

  1. Whatis the terminal, or horizon, value of operations? (Hint: Find the value of allfree cash flows beyond Year 2 discounted back to Year 2.)

  2. Calculatethe value of Kendra’s operations.

Chapter9 Problems 9 – 7 & 9 – 11

9– 7

Shi Importer’s balance sheet shows $300 million indebt, $50 million in preferred stock, and $250 million in total common equity.Shi’s tax rate is 40%, rd =6%, rps= 5.8%,and rs=12%. If Shi has a target capital structure of 30% debt, 5% preferred stock, and65% common stock, what is its WACC?

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