# [Get Answer ]-For Monday 4 21

### Question Description

I am needing help understanding how to calculate these problems.  I need them by Monday 4/21

You wrote a piece of software that does a better job of allowingcomputers to network than any other program designed for this purpose. A largenetworking company wants to incorporate your software into their systems and isoffering to pay you \$501,000 today, plus \$501,000 at the end of each of thefollowing six years for permission to do this. If the appropriate interest rateis 8 percent, what is the present value of the cash flow stream that thecompany is offering you? (Round answer to the nearest whole dollar, e.g.5,275.)

Present value

Barbara is considering investing in a stock and is awarethat the return on that investment is particularly sensitive to how theeconomy is performing. Her analysis suggests that four states of theeconomy can affect the return on the investment. Using the table ofreturns and probabilities below, find

Probability

Return

Boom

0.1

25.00%

Good

0.4

15.00%

Level

0.3

10.00%

Slump

0.2

-5.00%

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What is the expected return on Barbara’s investment? (Roundanswer to 3 decimal places, e.g. 0.076.)

Expectedreturn

Trevor Price bought 10-year bonds issued by Harvest Foods fiveyears ago for \$968.42. The bonds make semiannual coupon payments at a rate of8.4 percent. If the current price of the bonds is \$1,096.44, what is the yieldthat Trevor would earn by selling the bonds today? (Roundintermediate calculations to 4 decimal places, e.g. 1.2514 and final answer to2 decimal places, e.g. 15.25%.)

Effective annual yield

The First Bank of Ellicott City has issued perpetual preferredstock with a \$100 par value. The bank pays a quarterly dividend of \$1.65 onthis stock. What is the current price of this preferred stock given a requiredrate of return of 11.0 percent? (Round answer to 2 decimalplaces, e.g. 15.25.)

Current price

Trigen Corp. management will invest cash flows of \$764,771,\$388,567, \$652,392, \$818,400, \$1,239,644, and \$1,617,848 in research anddevelopment over the next six years. If the appropriate interest rate is 7.02percent, what is the future value of these investment cash flows six years fromtoday? (Round answer to 2 decimal places, e.g. 15.25.)

Future value

Genaro needs to capture a return of 40 percent for his one-yearinvestment in a property. He believes that he can sell the property at the endof the year for \$150,000 and that the property will provide him with rentalincome of \$25,000. What is the maximum amount that Genaro should be willing topay for the property?

\$137,500

\$150,000

\$112,500

\$125,000

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How firms estimate their cost of capital: The WACCfor a firm is 19.75 percent. You know that the firm is financed with \$75million of equity and \$25 million of debt. The cost of debt capital is 7percent. What is the cost of equity for the firm?

19.75%

32.50%

58.00%

24.00%

The cost of debt: Bellamee, Inc., hassemiannual bonds outstanding with five years to maturity and are priced at\$920.87. If the bonds have a coupon rate of 7 percent, then what is the YTM forthe bonds?

4.5%

9.2%

7.0%

9.0%

The cost of debt: Beckham Corporation hassemiannual bonds outstanding with 13 years to maturity and are currently pricedat \$746.16. If the bonds have a coupon rate of 8.5 percent, then what is theafter-tax cost of debt for Beckham if its marginal tax rate is 35%? Assume thatyour calculation is made as on Wall Street.

8.125%

6.250%

12.890%

12.500%

The cost of equity: RadicalVenOil, Inc., has acost of equity capital equal to 22.8 percent. If the risk-free rate of returnis 10 percent and the expected return on the market is 18 percent, then what isthe firm’s beta if the firm’s marginal tax rate is 35 percent?

1.0

1.60

1.28

4.10