1- Suppose that you read in The Wall Street Journal that a bond has a coupon rate of 9 percent, a price of 71.375% (of face value) , and pays interest annually. Rounded to the nearest whole percent, what would be the bond’s “current” yield?
A. 11%
B.13%
C. 15%
D. 17%
E. 20%
2- A 12-year bond has a 9 percent annual coupon, a yield to maturity of 8 percent, and a face value of $1,000. What is the price of the bond?
A. $1,469
B. $1,000
C. $ 928
D. $1,075
E. $1,957
3. Tuttle Enterprises is considering a project that has the following cash flow and WACC data. What is the project's NPV? Note that if a project's projected NPV is negative, it should be rejected.
WACC: 12.00%
Year 0 1 2 3 4
Cash flows -$1,000 $350 $350 $350 $350
a. $77.49
b. $81.56
c. $63.05
d. $90.15
e. $94.66
4. Resnick Inc. is considering a project that has the following cash flow data. What is the project's payback?
Year 0 1 2 3
Cash flows -$350 $200 $200 $200
a. 1.42 years
b. 1.58 years
c. 1.75 years
d. 1.93 years
e. 2.12 years
5. How much would $5,000 due in 25 years be worth today if the discount rate were 5.0%?
a. $1,476.52
b. $1,124.16
c. $1,183.33
d. $1,245.61
e. $1,311.17
6. Bosio Inc.'s perpetual preferred stock sells for $97.50 per share and it pays an $8.50 annual dividend. If the company were to sell a new preferred issue, it would incur a flotation cost of 4.00% of the price paid by investors. What is the company's cost of preferred stock for use in calculating the WACC?
a. 8.72%
b. 9.08%
c. 9.44%
d. 9.82%
e. 10.22%