QUESTION You need a 30-year, fixed-rate mortgage to buy a new home for $240,000. Your mortgage bank will lend you the money at a 6.35 percent APR for this 360-month loan. However, you can afford monthly payments of only $1,150, so you offer to pay off any remaining loan balance at the end of the […]
Date: September 2nd, 2020
QUESTION You are evaluating two stocks, A and B. Their historical 3-year performance has been a return of E[r(A)] = 11% and E[r(B)] = 13%, with standard deviations (A) = 16% and (B) = 23%. The market has returned E[r(M)] = 12% with a standard deviation of the market of (M) = 20%. You estimate […]
Date: September 2nd, 2020
QUESTION The returns on the common stock of New Image Products are quite cyclical. In a boom economy, the stock is expected to return 32 percent in comparison to 14 percent in a normal economy and a negative 28 percent in a recessionary period. The probability of a recession is 10 percent while the probability […]
Date: September 2nd, 2020
QUESTION C The Hernandez family is experiencing some financial pressures, even though the couple has a combined income of $66,000. Also, their eldest son, Joseph, will start college in only three years. Maria is contemplating going to work full time to add about $25,000 to the familys annual income. a. How will this change in […]
Date: September 2nd, 2020
QUESTION (Analysi s o f Leas e vs . Purchase ) Dunn Inc. owns and operates a number of hardware stores in the New England region. Recently, the company has decided to locate another store in a rapidly growing area of Maryland. The company is trying to decide whether to purchase or lease the building […]
Date: September 2nd, 2020
QUESTION (Computation of Bond Liability) George Hincapie Inc. manufactures cycling equipment. Recently, the vice president of operations of the company has requested construction of a new plant to meet the in- creasing demand for the companys bikes. After a careful evaluation of the request, the board of directors has decided to raise funds for the […]
Date: September 2nd, 2020
QUESTION John Fillmores lifelong dream is to own his own fishing boat to use in his retirement. John has recently come into an inheritance of $400,000. He estimates that the boat he wants will cost $300,000 when he retires in 5 years. How much of his inheritance must he invest at an annual rate of […]
Date: September 2nd, 2020
QUESTION New Colony Corporation (a U.S. company) made a sale to a foreign customer on September 15, 2013, for 100,000 foreign currency units (FCU). It received payment on October 15, 2013. The following exchange rates for 1 FCU apply: September 15, 2013 $0.40 September 30, 2013 0.42 October 15, 2013 0.37 Prepare all journal entries […]
Date: September 2nd, 2020
QUESTION For the next fiscal year, you forecast net income of $50,000 and ending assets of $500,000. Your firms payout ratio is 10%. Your beginning stockholders equity is $300,000 and your beginning total liabilities are $120,000. Your non-debt liabilities such as accounts payable are forecasted to increase by $10,000. What is your net new financing […]
Date: September 2nd, 2020
QUESTION MacKenzie Corporation currently has 10 million shares of stock outstanding at a price of $40 per share. The company would like to raise money and has announced a rights issue. Every existing shareholder will be sent one right per share of stock that he or she owns. The company plans to require ten rights […]
Date: September 2nd, 2020
