a.Zap Enterprises, Inc. has issued thirty-year semiannual coupon bonds with a face value of $1,000. If the annual coupon rate is (6%) and the current yield to maturity is 9%, what is the firms current price per bond? Answer is ________________________
b.You want to invest in a stock that pays $7.00 annual cash dividends for the next 6 years. At the end of the sixth year, you will sell the stock for $30.00. If you want to earn (6%) on this investment, what is a fair price for this stock if you buy it today?
Answer is _______________
C.RGG inc has only 2 scenarios: Boom and recession with the same probability to happen. In the boom the return will be (6%+ 60%) while in the recession will be only 20%. What is the expected return for RGG inc ?
Answer: ______________
d. What is the NET present Value of the following project witht the discount rate of (6%) ? Initial cost 9000 cashflow year 1: 3300. cashflow year 2: 3500. cashflow year 3: 7500.
Answer: Net PV = _________________
E.Gameiro Ltd. purchases a duplicating machine for $15,000. This machine qualifies as a five-year recovery asset under normal depreciation. The company has a tax rate of (6%). If the company sells the machine at the end of four years for $4,000, what is the cash flow from disposal after tax? Answer: cash flow from disposal is _________________
F. Elway Electronics has debt with a market value of $330,000, preferred stock with a market value of $145,000, and common stock with a market value of $550,000. If debt has a cost of (6%), preferred stock has a cost of 12%, common stock has a cost of 14%, and the firm has a tax rate of 33%, what is the WACC? Wacc is _____________
