PLEASE SHOW WORK FOR ALL, IF YOU'RE ONLY GOING TO DO ONE OF THESE AND NOT...

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Finance

PLEASE SHOW WORK FOR ALL, IF YOU'RE ONLY GOING TO DO ONE OFTHESE AND NOT ALL, DONT ANSWER
1. Assume that the risk-free rate is 5 percent and that themarket risk premium is 7 percent. If a stock has a required rate ofreturn of 13.75 percent, what must its beta be?
a.
1.25
b.
1.35
c.
1.37
d.
1.60
e.
1.96
2. Your family recently obtained a 30-year $100,000 fixed-ratemortgage. Which of the following statements is most correct?(Ignore all taxes and transactions costs.)
a.
The remaining balance after three years will be $100,000 lessthe total amount of interest paid during the first 36 months.
b.
The proportion of the monthly payment that goes towardsrepayment of principal will be higher 10 years from now than itwill be this year.
c.
The monthly payment on the mortgage will steadily decline overtime.
d.
All of the statements above are correct.
e.
None of the statements above is correct.
3. What is the present value of a 5-year ordinary annuity withannual payments of $200, evaluated at a 15 percent interestrate?
a.
$   670.43
b.
$   842.91
c.
$1,169.56
d.
$1,348.48
e.
$1,522.64
4. You are considering buying a new car. The sticker price is$15,000 and you have $2,000 to put toward a down payment. If youcan negotiate a nominal annual interest rate of 10 percent and youwish to pay for the car over a 5-year period, what are your monthlycar payments?
a.
$216.67
b.
$252.34
c.
$276.21
d.
$285.78
e.
$318.71
6. You are deciding on purchasing a house for $175,000. In orderto secure a 30 year mortgage at a 6% interest rate, your financecompany is requiring a 15% down payment. If you accepted the terms,how much would you pay in interest over the life of the loan?
a.
$12,060.85
b.
$124,565.82
c.
$12,000.00
d.
$172,309.31
e.
$148,746.95
7. You were recently able to secure financing on the purchase ofa new home. Your finance company has offered you a 30 year loanwith a 5.5% interest rate. If you have saved $25,500.00 to use as adown payment and plan to keep your mortgage payments no more than$1,475.00, what is the most you can afford to spend on your newhome?
a. $175,000.00
b. $249,550.25
c. $168,850.35
d. $285,279.60
e. $209,779.60
8. Johnston Corporation is growing at a constant rate of 6percent per year. It has both common stock and non-participatingpreferred stock outstanding. The cost of preferred stock is 8percent. The par value of the preferred stock is $120, and thestock has a stated dividend of 10 percent of par. What is themarket value of the preferred stock?
a.
$125
b.
$120
c.
$175
d.
$150
e.
$200
          9. A projecthas an up-front cost of $100,000. The project's WACC is 12 percentand its net present value is $10,000. Which of the followingstatements is most correct?
a.
The project should be rejected since its return is less than theWACC.
b.
The project's internal rate of return is greater than 12percent.
c.
The project's modified internal rate of return is less than 12percent.
d.
All of the statements above are correct.
e.
None of the statements above is correct.
10. The Seattle Corporation has been presented with aninvestment opportunity that will yield cash flows of $30,000 peryear in Years 1 through 4, $35,000 per year in Years 5 through 9,and $40,000 in Year 10. This investment will cost the firm $150,000today, and the firm's cost of capital is 10 percent. Assume cashflows occur evenly during the year, 1/365th each day. What is thepayback period for this investment?
a.
5.23 years
b.
4.86 years
c.
4.00 years
d.
6.12 years
e.
4.35 years
11. Braun Industries is considering an investment project thathas the following cash flows:
Year
Cash Flow
0
-$1,000
1
400
2
300
3
500
4
400
The company's WACC is 10 percent. What is the project's payback,internal rate of return (IRR), and net present value (NPV)?
a.
Payback = 2.4, IRR = 10.00%, NPV = $600.
b.
Payback = 2.4, IRR = 21.22%, NPV = $260.
c.
Payback = 2.6, IRR = 21.22%, NPV = $300.
d.
Payback = 2.6, IRR = 21.22%, NPV = $260.
e.
Payback = 2.6, IRR = 24.12%, NPV = $300.

Answer & Explanation Solved by verified expert

3.7 Ratings (371 Votes)

1 Assume that the riskfree rate is 5 percent and that the market risk premium is 7 percent If a stock has a required rate of return of 1375 percent what must its beta be a 125 Work Re Rf MRPBeta 1375 5 7Beta Beta 8757 125 2 Your family recently obtained a 30year 100000 fixedrate mortgage Which of the following statements is most correct Ignore all taxes and transactions costs c The monthly payment on the mortgage will steadily decline over time Work Since the principal payments will decrease the loan amount the interest amount would fall leading to decline in monthly mortgage payments 3 What is the present value of a 5year ordinary annuity with annual payments of 200 evaluated at a 15 percent interest rate a 67043 Work Present Value Annuity amount pvafrn 200 PVAF155 200 3352155 67043 4 You are considering See Answer

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