Finance Case

5 You are considering purchasing a bond that will start paying a coupon of $75 per year five years from now and the coupon payments will continue forever. If the discount rate is 6%, what is the maximum price you will pay?

8 The preferred stock of Placer Corp. currently sells for $33.33 per share. The annual dividend of $3 is fixed. Assuming a constant dividend forever, what is the rate of return on this stock?

9 A bond with a face value of $1,000 has annual coupon payments of $100 and was issued 5 years ago. The bond currently sells for $1,000 and has 10 years remaining to maturity. This bond's ________, ________, and _______ must be 10%.

10 As part of your financial planning, you wish to purchase a new car exactly 5 years from today. The car you wish to purchase costs $16,000 today, and your research indicates that its price will increase by 2% to 5% per year over the next 5 years. How much more expensive will the car be if the rate of inflation is 5% rather than 2%? BRAIN MASS

11 Suppose Jones, Inc. has just paid a dividend of $1.20 per share. Sales and profits for Jones Inc. are expected to grow at a rate of 6% per year. Its dividend is expected to grow by the same amount. If the required return is 9%, what is the value of a share of Jones Inc.?

12 According to the DuPont Analysis what are the three components of a firm's ROE?

13 Mary just purchased a zero coupon bond with face value $1,000, maturing in twenty-five years, for $250.00. What is the implicit interest, in dollars, she will earn in the first year of the bond's life?

14 What is the basic difference between the payback rule and the NPV rule in capital budgeting decision?

15 The ____________tax rate is the rate that applies if one more dollar of income is earned and the ___________ tax rate is the total tax bill divided by taxable income.

16 acko's Used Cars will sell you a 1976 Plymouth Voyager for $1,500 with no money down. You agree to make weekly payments for 2 years, beginning one week after you buy the car. The stated rate on the loan is 26%. How much is each payment?

17 The preferred stock of Cars-A-Lot currently sells for $48.55 per share. The annual dividend of $2.00 is