finc311 hw
In 2012, a baseball player signed a contract reported to be worth $107.2 million. The contract was to be paid as $16.2 million in 2012, $16.1 million in 2013, $18.6 million in 2014, $18.7 million in 2015, $18.7 million in 2016, and $18.9 million in 2017. If the appropriate interest rate is 12 percent, what kind of deal did the player snag? Assume all payments are paid at the end of the year
cost flow CF on calc
An investment offers a total return of 15 percent over the coming year. Bill Bernanke thinks the total real return on this investment will be only 8.7 percent.
(R+1)= (1+r)(1+h) R= 15% r= 8.7% h=x h= 5.8%
Curly's Life Insurance Co. is trying to sell you an investment policy that will pay you and your heirs $28,000 per year forever. A representative for Curly's tells you the policy costs $530,000. At what interest rate would this be a fair deal?
530,000=28,000/r 28000/530,000= 5.28%
on income tax question: Suppose both firms have identified a new project that will increase taxable income by $9,300. How much in additional taxes will each firm pay?
9,300 * 34% (amount from chart)= 3162 so each firm pays additional $3162
operating cash flow
EBIT + Depreciation - Taxes
You are scheduled to receive $21,500 in three years. When you receive it, you will invest it for seven more years at 9.5 percent per year. How much will you have in 10 years?
Even though we need to calculate the value in ten years, we will only have the money for seven years, so we need to use seven years as the number of periods. To find the FV of a lump sum, we use: N=7 I/Y=9.5 PV= -21,500 PMT=0 FV= 40,582.36
Crossfade Co. issued 17-year bonds two years ago at a coupon rate of 9.6 percent. The bonds make semiannual payments. If these bonds currently sell for 103 percent of par value, what is the YTM?
FV= 1000 PV=-1030 (1000*1.03) PMT= 48 N= 30 (17-2yrs=15*2=30) i/y= 9.23
EBIT
REVENUE- COSTS
current liabilities
accounts payable +notes payable
interest rates and future values of calc
always need to have negative PV
current assets-
cash +AR +Inventory
total assets
current assets +tanigible net fixed assets +intangible assets
total liab
current liab +long term debt
Merton Enterprises has bonds on the market making annual payments, with 14 years to maturity, and selling for $967. At this price, the bonds yield 7.9 percent. What must the coupon rate be on Merton's bonds?
n=14 pv=967 i/y=7.9 pv= 1000* cpt, pmt= x x/1000= 7.5%
What is the present value of $2,625 per year, at a discount rate of 9 percent, if the first payment is received 7 years from now and the last payment is received 21 years from now?
pmt= -2625 i/y= 9 n= 15 (21-7=14+1=15) cpt PV=21159.31 (7yrs) [2nd][clr tvm][+/-][fv] i/y= 9 n= 6 (7-1=6) cpt pv= 12,616.60
total liab and owners equity
total liab +common stock +accumulated retained earnings
