Financial management, Quizzes of Finance

Download Financial management and more Quizzes Finance in PDF only on Docsity! Ulrike Neumann/Vetta/Getty Images Answers to Selected End-of-Chapter Problems Note: This appendix presents some intermediate steps and final answers to selected end-of-chapter pro- blems. Please note that your answer may differ slightly due to rounding differences. Also, some of the problems may have more than one correct solu- tion depending upon the assumptions made in work- ing the problem. Finally, where the selected problems involve a verbal discussion as well as numerical cal- culations, the verbal answer is not provided. 3-2 $1,000,000 3-4 — $20,000,000 3-6 $25,000,000 3-8 a. $33,447 b. 28% c. 20.27% 3-10 $89,100,000 3-12 a. $50,000 b. $115,000 3-14 a. NOWCoo14 = $44,000; NOWC2915 = $53,725 . $10,675 CS= $50,000; RE = $32,025 |. EVA= $13,027.50 MVA= $17,975 . REzoi4 = $1,374 million . $1,600 million $15 million |. $620 million . $19,118.75 . $25% - 18.55% 42 44% M/B = 4.2667 ROE = 8% NI = $112,500 Po = $142.50 TIE = 2.25x ROE = 23.1% AROE = +7.2% TIE = 6.0x Accounts receivable = $405,682 Sales = $450,000; AR = $45,000; Inv = $90,000; FA = $150,000; CL = $75,000 a. Current ratio = 3.56x; Debt to total capital = 20.05%; 3-16 osP paogeppans DSO = 30.3 days; ROA = 6.00%; ROIC = 7.54% 5-12 5-16 5-18 5-20 5-22 5-24 5-26 5-28 5-30 5-32 5-34 5-36 5-38 b. Firm: ROE = 3.4% x 1.77 x $450/$315 = 8.6% Industry: ROE = 3.0% x 3 x ROE/ROA 0% x 3 x 12.86%/9.00% = 12.86% PV = $1,292.10 N = 11.0lyears FVAs = $1,725.22; FVAS5 Due = $1,845.99 PMT = $444.89; EAR = 12.6825% a. $895.42 . $1,552.92 . $279.20 b. fe d. $499.99; $867.13 a. 7% b. 7% c. 9% d. 15% a. $6,374.97 b. $1,105.13 $2,000.00 (1). $7,012.47 d(2). $1,160.38 (3). $2,000.00 PV7% = $1,428.57; PVia% = $714.29 a. Stream A: $1,251.25; Stream B: $1,300.32 b. Stream A and Stream B: $1,600 Contract 2: PV = $10,717,847.14 a. $802.43 b. Pymt 1 : Int = $500; Princ = $302.43; Pymt 2 : Int = $484.88; Princ = $317.55 c. $984.88 a. $279.20 b. $276.84 c. $443.72 $17,290.89; $19,734.26 Tnom = 7.8771% a. E= 63.74 yrs.; K = 41.04 yrs. b. $35,825.33 $496.11 a. PMT = $10,052.87 b. Yr.1: Int/Pymt = 24.87%; Princ/Pymt = 75.13%; Yr.2: Int/Pymt = 17.36%; Princ/Pymt = 82.64%; Yr.3: Int/Pymt = 9.09%; Princ/Pymt = 90.91% a. $5,308.12 b. $4,877.09 $309,015 2 B-2 Appendix B Answers to Selected End-of-Chapter Problems 5-40 6-2 6-4 6-6 6-8 6-10 6-12 6-14 6-16 6-18 7-2 7-4 7-6 7-8 7-10 7-12 7-14 7-16 7-18 8-4 8-6 8-8 8-10 8-12 8-14 8-16 8-18 8-20 9-2 $9,385 2.25% 1.5% 21.8% 8.5% 6.0% 0.35% a. r in Year 2 = 6% b. I) = 2%; 1p =5% 14% a. rp, = 9.20%; rr2 = 8.40%; ry3 = 7.60%; tr = 7.30%; rps = 7.20%; rio = 6.60%; Tr9= 6.30% a. 7.22% b. $988.46 YTM = 6.62%; YTC = 6.49%; most likely yield = 6.49% a. Bond C: $1,012.79; $1,010.02; $1,006.98; $1,003.65; $1,000.00 Bond Z: $693.04; $759.57; $832.49; $912.41; $1,000.00 15.03% a. YTM = 9.69% b. CY = 8.875%; CGY = 0.816% a. YTM = 8%; YTC = 6.1% a. 5 years b. YTIC = 6.47% $1,067.95 a. YTM = 8.35% b. YTC = 8.13% c. YTC = 8.13% d. Year 6; YTC = 8.27% bp = 1.12 tm = 11%; r= 12.2% a. fy = 14% b. 6x = 12.20%; CVy = 1.45 b= 1.33 4.2% a. r= 15.5% b(). tu = 15%; rj = 16.5% b(2). tm = 13%; 1; = 14.5% c(l). rj = 18.1% c(2). rj = 14.2% by = 1.16 tp = 11.75% a. $0.5 million (1). $75,000 d(2). 15% a. ra = 11.30%; rg = 11.30% B. tp avg = 11.30% c. 6, = 20.8%; 63 = 20.8%; op = 20.1% d. CVa = CVp = 1.84; CV, = 1.78 By = $6.25 9-4 9-6 9-8 9-10 9-12 9-14 9-16 9-18 9-20 9A-2 10-2 10-4 10-6 10-8 10-10 10-12 10-14 10-16 10-18 10-20 11-2 11-4 11-6 a. End of Year 2 b. $37.80 c. $34.09 Tp = 8.33% a. $125 b. $83.33 $23.75 a(1). $9.50 a(2). $13.33 a(3). $21.00 a(4). $44.00 b(l). Undefined b(2). —$48.00, which is nonsense Po = $19.89 6.25% a. Po = $54.11; D1 /Po =3.55%; CGY = 6.45% $35.00 a. Po = $32.14 b. Po = $37.50 c. Po = $50.00 d. Po = $78.28 Tp = 8% a. tr; = 15% b. re = 16.11% a. ts = 16.3% b. rs = 15.4% c. rs = 16% d. t5 avg = 15.9% ts = 16.51%; WACC = 12.79% WACC = 11.4% a. rs = 14.40% b. WACC = 10.62% c. Project A 11.94% g=8% . Di, = $2.81 . Ts = 15.81% ta(1 — T) = 7%; tp = 10.20%; 15 = 15.72% WACC = 13.86% . Projects 1 and 2 will be accepted . ta(1— T) = 5.4%; rs = 14.6% . WACC = 10.92% gspeogcpace IRR = 16% 4.34 years a. 5%: NPVa = $3.52; NPVpg = $2.87 10%: NPV, = $0.58; NPV, = $1.04 15%: NPV = —$1.91; NPVg = —$0.55 b. IRRag = 11.10%; IRRg = 13.18% c. 5%: Choose A; 10%: Choose B; 15%: Do not choose either one a. Without mitigation: NPV = $12.10 million; IRR = 19.86%; With mitigation: NPV = $5.70 million; IRR = 15.24%