FIN 571 Week 4 Connect Problems
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<strong>FIN</strong> <strong>571</strong> <strong>Week</strong> 4 <strong>Connect</strong> <strong>Problems</strong> –<br />
Assignment<br />
1. Microhard has issued a bond with the following characteristics:<br />
Par: $1,000<br />
Time to maturity: 11 years<br />
Coupon rate: 9 percent<br />
Semiannual payments<br />
Calculate the price of this bond if the YTM is (Do not round<br />
intermediate calculations and round your answers to 2 decimal places,<br />
e.g., 32.16.):<br />
Price of the Bond<br />
a. 9 percent $ _____
. 11 percent $_____<br />
c. 7 percent $ _____<br />
2. Watters Umbrella Corp. issued 20-year bonds 2 years ago at a coupon<br />
rate of 8.4 percent. The bonds make semiannual payments. If these<br />
bonds currently sell for 90 percent of par value, what is the YTM? (Do<br />
not round intermediate calculations and enter your answer as a percent<br />
rounded to 2 decimal places, e.g., 32.16.)<br />
YTM _____ %<br />
3. Grand Adventure Properties offers a 7 percent coupon bond with<br />
annual payments. The yield to maturity is 5.85 percent and the maturity<br />
date is 8 years from today. What is the market price of this bond if the<br />
face value is $1,000?<br />
$1,071.84<br />
$788.73<br />
$1,082.17<br />
$1,019.29<br />
$947.45<br />
4. The next dividend payment by ECY, Inc., will be $1.64 per share. The<br />
dividends are anticipated to maintain a growth rate of 8 percent,<br />
forever. The stock currently sells for $31 per share.<br />
What is the required return? (Do not round intermediate calculations<br />
and enter your answer as a percent rounded to 2 decimal places, e.g.,<br />
32.16.)<br />
Required return _____ %
5. The Starr Co. just paid a dividend of $1.55 per share on its stock. The<br />
dividends are expected to grow at a constant rate of 6 percent per year,<br />
indefinitely. Investors require a return of 14 percent on the stock.<br />
a. What is the current price? (Do not round intermediate calculations and<br />
round your answer to 2 decimal places, e.g., 32.16.)<br />
Current price $ _____<br />
b. What will the price be in three years? (Do not round intermediate<br />
calculations and round your answer to 2 decimal places, e.g., 32.16.)<br />
Stock price $ _____<br />
c. What will the price be in 7 years? (Do not round intermediate<br />
calculations and round your answer to 2 decimal places, e.g., 32.16.)<br />
Stock price $ _____<br />
Find the week 4 connect problems answers here <strong>FIN</strong> <strong>571</strong> <strong>Week</strong> 4 <strong>Connect</strong><br />
<strong>Problems</strong><br />
6. The next dividend payment by ECY, Inc., will be $1.64 per share. The<br />
dividends are anticipated to maintain a growth rate of 8 percent,<br />
forever. The stock currently sells for $31 per share.<br />
a. What is the dividend yield? (Do not round intermediate calculations and<br />
enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)<br />
Dividend yield _____%<br />
b. What is the expected capital gains yield? (Do not round intermediate<br />
calculations and enter your answer as a percent rounded to 2 decimal<br />
places, e.g., 32.16.)<br />
Capital gains yield ______ %<br />
7. Zoom stock has a beta of 1.46. The risk-free rate of return is 3.07<br />
percent and the market rate of return is 11.81 percent. What is the<br />
amount of the risk premium on Zoom stock?<br />
8.09%<br />
12.76%
9.59%<br />
10.25%<br />
17.24%<br />
8. The risk premium for an individual security is computed by:<br />
multiplying the security's beta by the market risk premium.<br />
multiplying the security's beta by the risk-free rate of return.<br />
adding the risk-free rate to the security's expected return.<br />
dividing the market risk premium by the quantity (1 + Beta).<br />
dividing the market risk premium by the beta of the security.<br />
9. The risk-free rate of return is 3.68 percent and the market risk premium<br />
is 7.84 percent. What is the expected rate of return on a stock with a<br />
beta of 1.32?<br />
9.17%<br />
9.24%<br />
13.12%<br />
14.03%<br />
14.36%<br />
10. Mullineaux Corporation has a target capital structure of 80 percent<br />
common stock and 20 percent debt. Its cost of equity is 17 percent, and<br />
the cost of debt is 11 percent. The relevant tax rate is 35 percent.<br />
What is the company’s WACC? (Do not round intermediate<br />
calculations and enter your answer as a percent rounded to 2<br />
decimal places, e.g., 32.16.)<br />
WACC _____ %<br />
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Assignment <strong>FIN</strong> <strong>571</strong> <strong>Week</strong> 4
11. Miller Manufacturing has a target debt–equity ratio of .65. Its cost<br />
of equity is 13 percent, and its cost of debt is 9 percent. If the tax rate is<br />
40 percent, what is the company’s WACC? (Do not round intermediate<br />
calculations and enter your answer as a percent rounded to 2 decimal<br />
places, e.g., 32.16.)<br />
WACC _____ %<br />
12. Filer Manufacturing has 7 million shares of common stock<br />
outstanding. The current share price is $79, and the book value per<br />
share is $6. The company also has two bond issues outstanding. The<br />
first bond issue has a face value $70 million, a coupon of 8 percent, and<br />
sells for 94 percent of par. The second issue has a face value of $40<br />
million, a coupon of 9 percent, and sells for 107 percent of par. The<br />
first issue matures in 23 years, the second in 6 years.<br />
a. What are the company's capital structure weights on a book value basis? (Do<br />
not round intermediate calculations and round your answers to 4 decimal<br />
places, e.g., 32.1616.)<br />
Equity / Value _____<br />
Debt / Value<br />
_____<br />
b. What are the company's capital structure weights on a market value basis?<br />
(Do not round intermediate calculations and round your answers to 4<br />
decimal places, e.g., 32.1616.)<br />
Equity / Value _____<br />
Debt / Value _____<br />
c. Which are more relevant?<br />
13. Titan Mining Corporation has 8.8 million shares of common stock<br />
outstanding and 320,000 4 percent semiannual bonds outstanding, par<br />
value $1,000 each. The common stock currently sells for $36 per share<br />
and has a beta of 1.4, and the bonds have 10 years to maturity and sell<br />
for 117 percent of par. The market risk premium is 7.6 percent, T-bills<br />
are yielding 5 percent, and the company’s tax rate is 38 percent.
a. What is the firm's market value capital structure? (Do not round<br />
intermediate calculations and round your answers to 4 decimal places, e.g.,<br />
32.1616.)<br />
Weight<br />
Debt _____ %<br />
Equity _____ %<br />
b. If the company is evaluating a new investment project that has the same risk<br />
as the firm's typical project, what rate should the firm use to discount the<br />
project's cash flows? (Do not round intermediate calculations and enter your<br />
answer as a percent rounded to 2 decimal places, e.g., 32.16.)<br />
Discount rate _____%<br />
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4 <strong>Connect</strong> <strong>Problems</strong>. The author is working in the field of education from<br />
last 5 years. This article covers the basic of Complete Assignment <strong>FIN</strong> <strong>571</strong><br />
<strong>Week</strong> 4 from UOP. Other topics in the class are as follows:<br />
<strong>FIN</strong> <strong>571</strong> <strong>Week</strong> 1 Quiz<br />
<strong>FIN</strong> <strong>571</strong> <strong>Week</strong> 2 Quiz<br />
<strong>FIN</strong> <strong>571</strong> <strong>Week</strong> 3 Quiz<br />
<strong>FIN</strong> <strong>571</strong> <strong>Week</strong> 4 Quiz<br />
<strong>FIN</strong> <strong>571</strong> <strong>Week</strong> 5 Quiz
<strong>FIN</strong> <strong>571</strong> <strong>Week</strong> 6 Quiz<br />
<strong>FIN</strong> <strong>571</strong> Final Exam (Newest)<br />
<strong>FIN</strong> <strong>571</strong> <strong>Week</strong> 1 <strong>Connect</strong> <strong>Problems</strong><br />
<strong>FIN</strong> <strong>571</strong> <strong>Week</strong> 2 <strong>Connect</strong> <strong>Problems</strong><br />
<strong>FIN</strong> <strong>571</strong> <strong>Week</strong> 3 <strong>Connect</strong> <strong>Problems</strong><br />
<strong>FIN</strong> <strong>571</strong> <strong>Week</strong> 4 <strong>Connect</strong> <strong>Problems</strong><br />
<strong>FIN</strong> <strong>571</strong> <strong>Week</strong> 5 <strong>Connect</strong> <strong>Problems</strong><br />
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