bus 320 connect homework 5 (new version sep 2013)
Question # 00001441 Subject: Business / Accounting Due on: 09/18/2013 Posted On: 09/21/2013 01:25 AM
Question
Rest attched in the file total 34 question
1 Problem 10-2 Bond value [LO3]
Applied Software has $1,000 par
value bonds outstanding at 20 percent interest. The bonds will mature in 15
years. UseAppendix
B andAppendix
D .
Compute the current price of the
bonds if the present yield to maturity is(Round "PV Factor" to 3 decimal places, intermediate and
final answers to 2
decimal places. Omit the "$" sign in your response) :
2.
value:
1.00
points
Problem 10-4 Bond value [LO3]
Barry’s Steroids Company has
$1,000 par value bonds outstanding at 14 percent interest. The bonds will
mature in 40 years.
If the percent yield to maturity
is 11 percent, what percent of the total bond value does the repayment of
principal represent? UseAppendix
B andAppendix
D .(Round intermediate calculations to 2 decimal
places, "PV Factor" and final answer to 3 decimal places. Omit the
"%" sign in your response.)
3.
value:
1.00
points
Problem 10-5 Bond value [LO3]
Essex Biochemical Co. has a $1,000
par value bond outstanding that pays 19 percent annual interest. The current
yield to maturity on such bonds in the market is 11 percent. UseAppendix
B andAppendix
D .
Compute the price of the bonds for
these maturity dates(Round "PV
Factor" to 3 decimal places, intermediate and final answers to 2 decimal
places. Omit the "$" sign in your response) :
rev: 04_27_2012
check
my work eBook
Link r
5.
value:
1.00
points
Problem 10-11 Effect of maturity on bond price [LO3]
(a)
Assume the interest rate in the
market (yield to maturity) goes down to 8 percent for the 10 percent bonds.
Using column 2, indicate what the bond price will be with a 10-year, a
20-year, and a 30-year time period.(Round
"PV Factor" to 3 decimal places, intermediate calculations and
final answers to 2 decimal places. Omit the "$" sign in your
response.)
(b)
Assume the interest rate in the
market (yield to maturity) goes up to 12 percent for the 10 percent
bonds. Using column 3, indicate what the bond price will be with a 10-year, a
20-year, and a 30-year period.(Round
"PV Factor" to 3 decimal places, intermediate calculations and
final answers to 2 decimal places. Omit the "$" sign in your
response.)
(c)
Assume the interest rate in the
market (yield to maturity) goes down to 8 percent for the 10 percent bonds.
If interest rates in the market are going down, which bond would you choose
to own?
(d)
Assume the interest rate in the
market (yield to maturity) goes up to 12 percent for the 10 percent bonds. If
interest rates in the market are going up, which bond would you choose to
own?
6.
value:
1.00
points
Problem 10-13 Effect of yield to maturity on bond price [LO3]
Tom Cruise Lines, Inc., issued
bonds five years ago at $1,000 per bond. These bonds had a 20-year life when
issued and the annual interest payment was then 14 percent. This return was
in line with the required returns by bondholders at that point as described
below:
Real rate of return
4
%
Inflation premium
5
Risk premium
5
Total
return
14
%
Assume that five years later the
inflation premium is only 2 percent and is appropriately reflected in the
required return (or yield to maturity) of the bonds. The bonds have 15 years
remaining until maturity.
Compute the new price of the bond.
UseAppendix
B andAppendix
D .(Round
"PV Factor" to 3 decimal places, intermediate and final answer
to 2 decimal places. Omit the "$" sign in your response.)
rev: 07-13-2011
7.
value:
2.00
points
Problem 10-14 Analyzing bond price changes [LO3]
(a)
Find the present value of 3
percent × $1,000 (or $30) for 15 years at 11 percent. The $30 is assumed to
be an annual payment. UseAppendix
D . (Round "PV Factor" to
3 decimal places, intermediate and final answer to 2 decimal places. Omit the "$" sign
in your response.)
(b)
Add the answer obtained in parta to 1,000.(Round "PV Factor" to 3 decimal
places, intermediate and final answer to 2 decimal places. Omit the "$" sign in your
response.)
8.
value:
2.00
points
Problem 10-17 Deep discount bonds [LO3]
Lance Whittingham IV specializes
in buying deep discount bonds. These represent bonds that are trading at well
below par value. He has his eye on a bond issued by the Leisure Time
Corporation. The $1,000 par value bond pays 8 percent annual interest and has
17 years remaining to maturity. The current yield to maturity on similar
bonds is 10 percent.
(a)
What is the current price of the
bonds? UseAppendix
B andAppendix
D . (Round "PV Factor" to
3 decimal places, intermediate and final answers to 2 decimal places. Omit
the "$" sign in your response.)
(b)
By what percent will the price of
the bonds increase between now and maturity?(Round
"PV Factor" to 3 decimal places, intermediate and final answers to
2 decimal places. Omit the "%" sign in your response.)
rev: 07-13-2011
check
my work eBook
Link references
9.
value:
1.00
points
Problem 10-19 Approximate yield to maturity [LO3]
Bonds issued by the Tyler Food
Corporation have a par value of $1,000, are selling for $1,410, and have 20
years remaining to maturity. The annual interest payment is 20.5 percent ($205).
Compute the approximate yield to
maturity.(Do not round intermediate calculations. Round
your answer to 2 decimal places. Omit the "%" sign in your
response.)
10.
value:
2.00
points
Problem 10-22 Bond value-semiannual analysis [LO3]
You are called in as a financial
analyst to appraise the bonds of Olsen’s Clothing Stores. The $1,000 par
value bonds have a quoted annual interest rate of 11 percent, which is paid
semiannually. The yield to maturity on the bonds is 14 percent annual
interest. There are 20 years to maturity. UseAppendix
B andAppendix
D .
(a)
Compute the price of the bonds
based on semiannual interest payments.(Round
"PV Factor" to 3 decimal places, intermediate and final answer to 2
decimal places. Omit the "$" sign in your response.)
(b)
With 15 years to maturity, if
yield to maturity goes down substantially to 8 percent, what will be the new
price of the bonds?(Round "PV Factor" to 3 decimal
places, intermediate and final answer to 2 decimal places. Omit the
"$" sign in your response.)
11.
value:
1.00
points
Problem 10-24 Preferred stock value [LO4]
Bedford Mattress Company issued
preferred stock many years ago. It carries a fixed dividend of $11 per share.
With the passage of time, yields have gone down from the original 10 percent
to 9 percent (yield is the same as required rate of return).
(a)
What was the original issue price?(Round your answer to 2 decimal places. Omit the "$" sign in your response.)
(b)
What is the current value of this
preferred stock?(Round your answer to 2 decimal
places. Omit the "$"
sign in your response.)
12.
value:
1.00
points
Problem 10-26 Preferred stock rate of return [LO4]
Grant Hillside Homes, Inc., has
preferred stock outstanding that pays an annual dividend of $10.30. Its price
is $167.
What is the required rate of
return (yield) on the preferred stock?(Round
your answer to 2 decimal places. Omit the "%" sign in your
response.)
13.
value:
1.00
points
Problem 10-28 Common stock value [LO5]
Laser Optics will pay a common
stock dividend of $3.20 at the end of the year (D_{1} ). The required
rate of return on common stock (K_{e} ) is 20 percent. The firm has a
constant growth rate (g) of 10 percent.
Compute the current price of the
stock (P_{0} ).(Round
your answer to 2 decimal places. Omit the "$" sign in your response.)
14.
value:
2.00
points
Problem 10-29 Common stock value under different market
conditions [LO5]
Ecology Labs, Inc., will pay a
dividend of $6.80 per share in the next 12 months (D_{1} ). The
required rate of return (K_{e} ) is 15 percent and the constant growth
rate is 5 percent.(Each question is independent of the others.)
(a)
Compute the price of Ecology Labs'
common stock.(Round your intermediate and final answer to 2
decimal places. Omit the "$" sign in your response.)
(b)
Assume K_{e} , the required
rate of return, goes up to 20 percent; what will be the new price?(Round your intermediate and final answer to 2
decimal places. Omit the "$" sign in your response.)
(c)
Assume the growth rate (g) goes up
to 7 percent; what will be the new price? K_{e} goes back to its
original value of 15 percent.(Round your intermediate and final answer to 2
decimal places. Omit the "$" sign in your response.)
(d)
Assume D_{1} is $7.50; what will be the new price? Assume K_{e} is
at its original value of 15 percent and g goes back to its original value of
5 percent.(Round your intermediate and final answer to 2
decimal places. Omit the "$" sign in your response.)
15.
value:
2.00
points
Problem 10-31 Common stock value based on determining growth
rate [LO5]
Justin Cement Company had the
following pattern of earnings per share over the last five years:
Year
Earnings
per share
2006
$
10.00
2007
10.50
2008
11.03
2009
11.58
2010
12.16
The earnings per share have grown
at a constant rate (on a rounded basis) and is expected to do so in the
future. Dividends represent 40 percent of earnings.
(a)
Project earnings and dividends for
the next year (2011).(Round your intermediate and final answers to 2 decimal places. Omit the
"$" sign in your response.)
(b)
If the required rate of return (K_{e} )
is 13 percent, what is the anticipated stock price (P_{0} ) at the
beginning of 2011?(Round your intermediate and final answers to 2 decimal places. Omit the
"$" sign in your response.)
check
my work eBook
Link references
16.
value:
1.00
points
Problem 10-32 Common stock required rate of return [LO5]
A firm pays a $9.80 dividend at
the end of year one (D_{1} ), has a stock price of $137, and a
constant growth rate (g) of 5 percent.
Compute the required rate of
return (K_{e} ).(Round your intermediate and final answer to 2 decimal places. Omit the "%" sign in your
response.)
17.
value:
4.00
points
Problem 10-35 Common stock value based on PV calculations [LO5]
Beasley Ball Bearings paid a $4
dividend last year. The dividend is expected to grow at a constant rate of 4
percent over the next four years. The required rate of return is 16 percent
(this will also serve as the discount rate in this problem). UseAppendix
B .
(a)
Compute the anticipated value of
the dividends for the next four years.(Round your intermediate calculations and final answers to 3
decimal places. Omit the "$" sign in your response.)
(b)
Calculate the present value of
each of the anticipated dividends at a discount rate of 16 percent.(Round "PV Factor", intermediate calculations and
final answers to 3 decimal places. Omit the "$" sign in your
response.)
(c)
Compute the price of the stock at
the end of the fourth year (P_{4} ).(Round "PV Factor", intermediate calculations and final
answer to 3 decimal places. Omit the "$" sign in your response.)
(d)
Calculate the present value of the
year 4 stock price at a discount rate of 16 percent.(Round "PV Factor", intermediate
calculations and final answer to 3 decimal places. Omit the "$"
sign in your response.)
(e)
Compute the current value of the
stock.(Round
"PV Factor", intermediate calculations and final answer to 3
decimal places. Omit the "$" sign in your response.)
(f)
Use formula given below to show
that it will provide approximately the same answer as parte .(Omit the "$" sign in your response.)
(g)
If current EPS is equal to $5.329
and the P/E ratio is 1.2 times higher than the industry average of 6, what
would the stock price be?(Round your intermediate calculations and final
answers to 2 decimal places. Omit the "$" sign in your response.)
(h)
By what dollar amount is the stock
price in partg different from the stock price in partf ?(Input the amount as a positive value. Round
intermediate calculations and final answer to 2 decimal places. Omit the
"$" sign in your response.)
(i)
In regard to the stock price in
partf , indicate
which direction it would move if
(1)
D_{1} increases
(Click to select)
Stock price decreases
Stock price increases
(2)
K_{e} increases
(Click to select)
Stock price increases
Stock price decreases
(3)
g increases
(Click to select)
Stock price decreases
Stock price increases
18.
value:
1.00
points
Problem 11-2 Cost of capital [LO2]
Speedy Delivery Systems can buy a
piece of equipment that should provide an 6 percent return and can be
financed at 3 percent with debt. The CEO likes earning more than the cost of
debt, and he thinks this would be a good deal. The firm can also buy a
machine that would yield a 13 percent return but would cost 15 percent to
finance through common equity. Earning less than the cost of equity sounds
bad to the CEO. Assume debt and common equity each represent 50 percent of
the firm’s capital structure.
(a)
Compute the weighted average cost
of capital.(Round your intermediate and final answers to 1
decimal place. Omit the "%" sign in your response.)
(b)
Which project(s) should be
accepted?
19.
value:
1.00
points
Problem 11-3 Effect of discount rate [LO2]
A brilliant young scientist is
killed in a plane crash. It was anticipated that he could have earned
$260,000 a year for the next 25 years. The attorney for the plaintiff’s
estate argues that the lost income should be discounted back to the present
at 5 percent. The lawyer for the defendant’s insurance company argues for a
discount rate of 10 percent.
What is the difference between the
present value of the settlement at 5 percent and 10 percent? Compute each one
separately.UseAppendix
D .(Round "PV Factor" to 3 decimal
places. Round your answers to the nearest dollar amount. Omit the
"$" sign in your response)
Present
value
PV at 5% rate
$
PV at 10% rate
Difference
$
20.
value:
1.00
points
Problem 11-5 Aftertax cost of debt [LO3]
Calculate the aftertax cost of
debt under each of the following conditions.(Round
your answers to 2 decimal places. Omit the "%" sign in your
response.)
Yield
Corporate
tax rate
Cost
of debt
a.
4.0
%
10
%
%
b.
6.6
20
c.
6.0
20
Attachments