Question 8: You own a bond with a face value of $10,000. It matures on March 1, 2024 and pays interest semi-annually at a coupon rate of 8%. Current interest rates for securities of comparable maturity and credit quality are 5.5%. (Attach an Excel spreadsheet showing the answer)
If you sell the bond on March 1, 2014, what price will you get?
Question 9: The town landfill has salary costs of $10,000 per month and utility costs of $2,500 per month. Its hauling and compacting costs are $5 per ton of refuse. The town expects to receive and process 625 tons of refuse a month, and wants to charge a tipping fee per ton that is sufficient to break even. How much should the town charge? Show your work in an excel spreadsheet.
Question 10 Troy Meals on Wheels has a contract with the city to feed homebound elderly people. Under the contract, MMW earns $140 per month for each person enrolled in the program. MMW expects to deliver meals to the number of seniors shown below. The city pays one-half of the amount MMW bills one month after the services are delivered, and one-half two months after billing. It costs MMW $125 for food and fuel for each person it feeds. Suppliers demand payment one month after food and fuel is used. This is MMW’s first year of operation. It started the year with $17,000 in cash. Please complete an operating budget for MMW and a cash budget to find the following information. Attach your response in an excel file.
a. What is MMW’s expected surplus or deficit for the first quarter based solely on contract revenue, food and fuel expenses?
b. What does MMW’s expect its cash balance to be at the end of the first quarter based solely on contract revenue, food and fuel expenses?
Question 11 After several years of operating the churches homeless shelter, you bring a new proposal to the governing board. By cleaning up an unused room and upgrading the church kitchen, the shelter will be able to expand its capacity. As a result, it will generate cash inflows and cash outflows over the remaining 5 years of the City contract in the amounts in the table below. If the discount rate is 6%, should the church proceed with this investment? Use NPV and an excel spreadsheet to show your work.
Year Cash Inflows Cash Outflows
0 0 (90,000)
1 37,000 (18,000)
2 39,000 (18,000)
3 42,000 (18,500)
4 44,000 (18,500)
5 45,000 (19,000)