# umuc finc330 final examination latest june 2016

June 13, 2018

Final examination

Value (price) of bond, annually
Question 1 1
/ 1 point
What is the value of a bond that has a par value of \$1,000,
a coupon rate of 8.25 percent (paid annually), and that matures in 16 years?
Assume a required rate of return on this bond is 8.65 percent.

Round the answer to two decimal places.

Question 2 1
/ 1 point
Pet Food Company bonds pay an annual coupon rate of 8.79
percent. Coupon payments are paid semiannually. Bonds have 21 years to maturity
and par value of \$1,000. Compute the value of Pet Food Company bonds if the
market interest rate on this type of bond is 10.89 percent.

Round the answer to two decimal places.

Question 3 1
/ 1 point
Blue Crab, Inc. plans to issue new bonds, but is uncertain
how the market would set the yield to maturity. The bonds would be 29-year to
maturity, carry a 8.02 percent annual coupon, and have a \$1,000 par value. Blue
Crab, Inc. has determined that these bonds would sell for \$1,191 each. What is
the yield to maturity for these bonds?

Round the answers to two decimal places in percentage form.

You should use Excel or financial calculator.

Question 4 1
/ 1 point
A few years ago, Spider Web, Inc. issued bonds with a 8.23
percent annual coupon rate, paid semiannually. The bonds have a par value of
\$1,000, a current price of \$1,092, and will mature in 20 years. What would the
annual yield to maturity be on the bond if you purchased the bond today?

Round the answer to two decimal places in percentage form.

You should use Excel or financial calculator.

Question 5 1
/ 1 point
Black Water Corp. just issued zero-coupon bonds with a par
value of \$1,000. The bond has a maturity of 24 years and a yield to maturity of
6.71 percent, compounded annually. What is the current price of the bond?

Round the answer to two decimal places.

Question 6 1
/ 1 point
What is the yield to call of a 30-year to maturity bond that
pays a coupon rate of 7.00 percent per year, has a \$1,000 par value, and is
currently priced at \$988? The bond can be called back in 8 years at a call
price \$1,098. Assume annual coupon payments.

Round the answer to two decimal places in percentage form.

You should use Excel or financial calculator.

Question 7 1
/ 1 point
A \$1,000 par value bond with a 13.54 percent coupon rate,
currently selling for \$1,035, has a current yield of _____.

Round the answer to two decimal places in percentage form.

Question 8 1
/ 1 point
Tall Trees, Inc. is using the net present value (NPV) when
evaluating projects. You have to find the NPV for the company’s project,
assuming the company’s cost of capital is 14.81 percent. The initial outlay for
the project is \$355,720. The project will produce the following after-tax cash
inflows of

Year 1: 198,168

Year 2: 164,946

Year 3: 62,686

Year 4: 136,491

Round the answer to two decimal places.

Question 9 1
/ 1 point
Deep Waters, Inc. is using the internal rate of return (IRR)
when evaluating projects. Find the IRR for the company’s project. The initial
outlay for the project is \$307,000. The project will produce the following
after-tax cash inflows of

Year 1: 142,300

Year 2: 126,800

Year 3: 133,200

Year 4: 198,700

Round the answer to two decimal places in percentage form.

You should use Excel or financial calculator.

Question 10 1
/ 1 point
Marathon Technologies, Inc. is using the modified internal
rate of return (MIRR) when evaluating projects. The company is able to reinvest
cash flows received from the project at an annual rate of 8.50 percent. The
initial outlay for the project is \$473,800. Find the MIRR for the company’s
project. The project will produce the following after-tax cash inflows of

Year 1: \$229,700

Year 2: \$232,300

Year 3: \$191,800

Year 4: \$246,300

Round the answer to two decimal places in percentage form.

Question 11 1
/ 1 point
Find the profitability index (PI) for the following series
of future cash flows, assuming the company’s cost of capital is 9.71 percent.
The initial outlay is \$447,775.

Year 1: \$130,230

Year 2: \$150,944

Year 3: \$140,301

Year 4: \$136,872

Year 5: \$133,530

Round the answer to two decimal places.

Question 12 1
/ 1 point
Find the Payback period for the following project:

Project X

Initial Outlay

\$8,050

Year 1

\$3,130

Year 2

\$3,010

Year 3

\$3,690

Year 4

\$7,920

The answer should be calculated to two decimal places.

Question 13 1
/ 1 point
The Black Bird Company plans an expansion. The expansion is
to be financed by selling \$137 million in new debt and \$17 million in new
common stock. The before-tax required rate of return on debt is 8.58% percent
and the required rate of return on equity is 15.86% percent. If the company is
in the 34 percent tax bracket, what is the weighted average cost of capital?

Round the answer to two decimal places in percentage form.

Question 14 1
/ 1 point
Try to determine the required rate of return on Tilden Woods
Corporation’s common stock. The firm’s beta is 1.40. The rate on a 10-year
Treasury bond is 3.09 percent, and the market risk premium is 8.38 percent.

Round the answers to two decimal places in percentage form.

Question 15 1
/ 1 point
Black Hill Inc. sells \$100 million worth of 13-year to
maturity 11.39% annual coupon bonds. The net proceeds (proceeds after flotation
costs) are \$973 for each \$1,000 bond. What is the before-tax cost of capital
for this debt financing?

Round the answer to two decimal places in percentage form.

You should use Excel or financial calculator.

Question 16 1
/ 1 point
El Dorado Storage has the following projections for Year 1
of a capital budgeting project.

Sales \$201,951

Variable costs \$121,655

\$11,929

Depreciation Expense \$13,950

Tax Rate 35%

Calculate the operating cash flow for Year 1. Round the

Question 17 1
/ 1 point
Calculate the cost of new common equity financing of stock R
using Gordon Model

Round the answers to two decimal places in percentage form.

Last Year Dividend

Growth Rate of Dividends

Selling Price of Stock

Floatation Costs

Cost of Common Equity

Stock R

\$3.77

2.1%

\$75.05

\$4.73

?

Question 18 1
/ 1 point
Paul Sharp is CFO of Fast Rocket Inc. He tries to determine
the cost of equity financing for his company. The stock has a beta of 2.39.
Paul estimated that the market return is 8.04%. The current rate for 10-year
Treasury Bonds is 2.41%. Calculate cost of common equity financing using CAPM –
SML formula.

Round the answers to two decimal places in percentage form.

Question 19 1
/ 1 point
John invested the following amounts in three stocks:

Security Investment Beta
Stock A \$480,378 1.01
Stock B \$513,730 0.70
Stock C \$480,957 1.60
Calculate the beta portfolio.

Round the answers to two decimal places.

Question 20 1
/ 1 point
Calculate the expected return on stock of Gamma Inc.:

State of the economy Probability
of the states Percentage
returns
Economic recession 18% -6.0%
38% 4.8%
calculate it 11.5%
Round the answers to two decimal places in percentage form.

Question 21 1
/ 1 point
You hold a portfolio with the following securities:

Security Percent
of portfolio Return
Stock A 34% 5.9%
Stock B 15% 11.6%
calculate it 5.7%
Calculate the expected return of portfolio. Round the
the “units” box).

Question 22 1
/ 1 point
Mary purchased 200 shares of Harley Davidson Co. stock at a
price of \$85.92 six months ago. She sold all stocks today for \$92.87. During
the year the stock paid dividends of \$4.17 per share. What is Mary’s holding
period return?

Round the answers to two decimal places in percentage form.

Question 23 1
/ 1 point
The next year the common stock of Gold Corp. will pay a
dividend of \$5.42 per share. If the company is growing at a rate of 3.65
percent per year, and your required rate of return is 10.27 percent, what is
Gold’s company stock worth to you?

Round the answer to two decimal places.

Question 24 1
/ 1 point
Deci-Bell, Inc. is producing new headphones, but first
management wants to determine its degree of operating leverage. Deci-Bell Inc.
has a base level of sales of 239,560 units. Sales price per unit is \$129.24 and
variable cost per unit is \$72.45. Total annual operating fixed costs are
\$7,006,700.

Calculate Deci-Bell’s
degree of operating leverage. Round the answer to two decimal places

Question 25 1
/ 1 point
Appliance for Less is a local appliance store. It costs this
store \$23.11 per unit annually for storage, insurance, etc., to hold microwave
in their inventory. Sales this year are anticipated to be 589 units. Each order
costs \$80. The company is using Economic Order Quantity model in placing the
orders.

Calculate Economic Order Quantity.

(Round the answer to the whole number)

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