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For Monday 4/21

I am needing help understanding how to calculate these problems.  I need them by Monday 4/21

You wrote a piece of software that does a better job of allowing computers to network than any other program designed for this purpose. A large networking company wants to incorporate your software into their systems and is offering to pay you \$501,000 today, plus \$501,000 at the end of each of the following six years for permission to do this. If the appropriate interest rate is 8 percent, what is the present value of the cash flow stream that the company is offering you? (Round answer to the nearest whole dollar, e.g. 5,275.)

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 Present value

Barbara is considering investing in a stock and is aware that the return on that investment is particularly sensitive to how the economy is performing. Her analysis suggests that four states of the economy can affect the return on the investment. Using the table of returns and probabilities below, find

 Probability Return

 Boom 0.1 25.00% Good 0.4 15.00% Level 0.3 10.00% Slump 0.2 -5.00%

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What is the expected return on Barbara’s investment? (Round answer to 3 decimal places, e.g. 0.076.)

 Expected return

Trevor Price bought 10-year bonds issued by Harvest Foods five years ago for \$968.42. The bonds make semiannual coupon payments at a rate of 8.4 percent. If the current price of the bonds is \$1,096.44, what is the yield that Trevor would earn by selling the bonds today? (Round intermediate calculations to 4 decimal places, e.g. 1.2514 and final answer to 2 decimal places, e.g. 15.25%.)

 Effective annual yield

The First Bank of Ellicott City has issued perpetual preferred stock with a \$100 par value. The bank pays a quarterly dividend of \$1.65 on this stock. What is the current price of this preferred stock given a required rate of return of 11.0 percent? (Round answer to 2 decimal places, e.g. 15.25.)

 Current price

Trigen Corp. management will invest cash flows of \$764,771, \$388,567, \$652,392, \$818,400, \$1,239,644, and \$1,617,848 in research and development over the next six years. If the appropriate interest rate is 7.02 percent, what is the future value of these investment cash flows six years from today? (Round answer to 2 decimal places, e.g. 15.25.)

 Future value

Genaro needs to capture a return of 40 percent for his one-year investment in a property. He believes that he can sell the property at the end of the year for \$150,000 and that the property will provide him with rental income of \$25,000. What is the maximum amount that Genaro should be willing to pay for the property?

 \$137,500
 \$150,000
 \$112,500
 \$125,000

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How firms estimate their cost of capital: The WACC for a firm is 19.75 percent. You know that the firm is financed with \$75 million of equity and \$25 million of debt. The cost of debt capital is 7 percent. What is the cost of equity for the firm?

 19.75%
 32.50%
 58.00%
 24.00%

The cost of debt: Bellamee, Inc., has semiannual bonds outstanding with five years to maturity and are priced at \$920.87. If the bonds have a coupon rate of 7 percent, then what is the YTM for the bonds?

 4.5%
 9.2%
 7.0%
 9.0%

The cost of debt: Beckham Corporation has semiannual bonds outstanding with 13 years to maturity and are currently priced at \$746.16. If the bonds have a coupon rate of 8.5 percent, then what is the after-tax cost of debt for Beckham if its marginal tax rate is 35%? Assume that your calculation is made as on Wall Street.

 8.125%
 6.250%
 12.890%
 12.500%

The cost of equity: RadicalVenOil, Inc., has a cost of equity capital equal to 22.8 percent. If the risk-free rate of return is 10 percent and the expected return on the market is 18 percent, then what is the firm’s beta if the firm’s marginal tax rate is 35 percent?

 1
 1.6
 1.28
 4.1