finance questions

August 14, 2017

Interest
Project
C
Project
H

cash
flow c
Cash
flow H

2%
\$45.47
\$62.07

-175
-200

5%
\$32.81
\$44.96

85
70

7%
\$25.32
\$34.89

75
80

10%
\$15.32
\$21.51

70
125

12%
\$9.38
\$13.61

15%
\$1.43
\$3.09

18%
(\$5.51)
(\$6.05)

21%
(\$11.58)
(\$14.01)

22.62%
(\$14.54)
(\$17.87)

25%
(\$18.53)
(\$23.04)

27%
(\$21.57)
(\$26.97)

Please see the attachment for full question***************************************************************************NCorporate Finance Name
______________________________

Answer each of the following in the space provided. Be sure to show your work.

1.
You have your savings invested in an FDIC insured
account (Account A) that pays a nominal rate of 3.00% with interest compounded
monthly. You are considering moving your
savings to another FDIC insured account (Account B) that offers a nominal rate
of 3.10%, but with interest compounded daily.
Determine which account you should use for your investment.

Two years ago, Steven Industries issued 20-year, \$1,000 Par
Value bonds with 6% coupon rate with interest paid semiannually. At origination, the bonds had a five year
call provision with a \$100 premium.
Boxer’s cost of debt for these bonds has fallen to 4%. What is the price of one of their bonds?

Harris, Inc. has \$5 billion in
assets and its tax rate is 40%. Its
basic earning power ratio is 10%, and its return on assets is 5%. What is Harris’s times-interest-earned ratio?

2.
Consider two mutually exclusive projects, C & H,
with the following cash flows. The IRR
for project C is 14.05%, the IRR for project H is 15.97%, and both projects
would have the same NPV if the required rate of return was 22.62%. Determine the range of interest rates in
which you would choose project C, the range of interest rates in which you
would choose project H, and the range of interest rates for which you would
reject both project.

Time

0

1

2

3

CFC

(\$175)

\$85

\$75

\$70

CFH

(\$200)

\$70

\$80

\$125

Masters Mining is considering the
purchase of some new equipment that will expand their business. The revenues and expenditures associated with
that expansion are listed below (negative numbers in parentheses). Find the Net Present Value of this expansion

Time

0

1

2

3

Equipment

(\$1,200,000)

Installation

(\$50,000)

DNWC

(\$80,000)

Sales

\$1,370,000

\$1,450,000

\$1,554,000

– non-depreciable Costs

(\$900,000)

(\$912,000)

(\$944,000)

– Depreciation & Amortization

(\$412,500)

(\$562,500)

(\$187,500)

-Tax

(\$20,126)

\$8,576

(\$147,876)

Salvage

\$290,000

– Capital Gains Tax

(\$70,876)

ReturnDNWC

\$80,000

Cash Flow

(1330000)

449874

546576

761248

WACC

12.00%

NPV

49279.19