Question 1:

a) Assume that you earn fetter $4000 at the end of each of the proximate three years in a St. George bank statement paying 8% concern. You currently accept $7000 in the statement. How considerable earn you accept in three years? In disgusting years?

b) You are looking into an cannonade that earn pay you $12,000 per year for the proximate 10 years. If you demand a 15% repay, what is the most you would pay for this cannonade?

c) A fetter has an 8% coupon, hired semi-annually. The aspect appraise is $100, and the fetter matures in 6 years. If the fetter currently sells for $91.137, what is the consent to manliness? What is the serviceable annual consent?

Question 2:

We accept two cannonade designs A&B. Both designs consume $250, and we demand a 15% repay of the two cannonades.

Year A B

1 $100 $100

2 $100 $200

3 $100 0

4 $100 0

a) Based on the payback continuance administration, which design would you glean? Explain.

b) Based on the NPV administration, which design would you glean? Explain.

c) Do a) and b) afford you the identical omission? If not, why? Gladden execute.

d) What other methods can you use to evaluate contemplated cannonades? Gladden clear-up.

Question 3:

The ABC Company has a WACC of 20%. Its consume of something-due is 12%, which is resembling to the risk-free objurgate of concern. If ABC’s something-due to equity relevancy is 2, what is the consume of equity principal? ABC’s equity beta is 1.5.

a) What are the M&M statements I, II and III, gladden use graphs/charts and signification to clear-up.

b) Based on the M&M statement II, what is the beta of the full established?

Question 1:

a) Assume that you earn fetter $4000 at the end of each of the proximate three years in a St. George bank statement paying 8% concern. You currently accept $7000 in the statement. How considerable earn you accept in three years? In disgusting years?

b) You are looking into an cannonade that earn pay you $12,000 per year for the proximate 10 years. If you demand a 15% repay, what is the most you would pay for this cannonade?

c) A fetter has an 8% coupon, hired semi-annually. The aspect appraise is $100, and the fetter matures in 6 years. If the fetter currently sells for $91.137, what is the consent to manliness? What is the serviceable annual consent?

Question 2:

We accept two cannonade designs A&B. Both designs consume $250, and we demand a 15% repay of the two cannonades.

Year A B

1 $100 $100

2 $100 $200

3 $100 0

4 $100 0

a) Based on the payback continuance administration, which design would you glean? Explain.

b) Based on the NPV administration, which design would you glean? Explain.

c) Do a) and b) afford you the identical omission? If not, why? Gladden execute.

d) What other methods can you use to evaluate contemplated cannonades? Gladden clear-up.

Question 3:

The ABC Company has a WACC of 20%. Its consume of something-due is 12%, which is resembling to the risk-free objurgate of concern. If ABC’s something-due to equity relevancy is 2, what is the consume of equity principal? ABC’s equity beta is 1.5.

a) What are the M&M statements I, II and III, gladden use graphs/charts and signification to clear-up.

b) Based on the M&M statement II, what is the beta of the full established?