Last national bank offers a CD paying 7%

Last national bank offers a CD paying 7%

Subject: Business    / Finance
Question
7.    Last national bank offers a CD paying 7% interest (compounded annually). If you invest $1,000 how much will you have at the end of year 5?

8.    You want to buy your dream car, but you are $5,000 short. If you could invest your entire savings of $2,350 at an annual interest of 12%, how long would you have to wait until you have accumulated enough money to buy the car?

9.    A 15-year, 8%, $1000 face value bond is currently trading at $958. The yield to maturity of this bond must be?

14.    Bavarian Sausage just paid a $1.57 dividend and investors expect that dividend to grow by 5% each year forever. If the required return on the stock investment is 14%, what should be the price of the stock today?

17.    The risk-free rate is 5% and the expected return on the market portfolio is 13%. A stock has a beta of 1.5, what is its expected return?

21.    Gamma Electronics is considering the purchase of testing equipment that will cost $500,000 to replace old equipment. Assume the new machine will generate after-tax savings of $250,000 per year over the next four years. What’s the payback period for the investment?

22.    Gamma Electronics is considering the purchase of testing equipment that will cost $500,000 to replace old equipment. Assume the new machine will generate after-tax savings of $250,000 per year over the next four years. If Gamma Electronics as a 15% cost of capital, what’s the NPV of the investment?

26.    The following data have been computed for a firm: when sales are $20,000, EBIT is $5,000 and operating leverage is 2.5. Suppose sales increase to $23,000; what is the new level of EBIT?

29.    Bavarian Brewhouse is planning on going public. Under the underwriting agreement the underwriting discount is 7.25%. If the offering price of the stock is set at $12.50 per share, what is the per share proceeds that Bavarian will receive?

30.    Bavarian Brew, an unlevered firm, has an expected EBIT of $500,000. The required return on assets for the firm’s assets is 10%. The company has 250,000 shares outstanding. The company is considering raising $1 million in debt with a required return of 6% and would use the proceeds to repurchase outstanding stock. What is the value of Bavarian Brew before restructuring? Assume no corporate taxes.

36.    Choc-lattes Corp. earned $5.00 per share in 2006, and paid a dividend of $2.00 per share. If it earns $5.50 in 2007 and follows a constant nominal payout policy, its dividend will be?

37.    Amazing Growth Company shares currently trade at $108 per share. There are 24 million shares outstanding. If the shares are split 3-for-1, how many shares will be outstanding, and what value per share will they have (ignoring any other market changes)?