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1. You just turned 22 today. You've just been told by Santa Claus that since you did so well in your Finance class, on your 30th birthday, you will inherit a bond with a face value of $150,000. The bond pays you annual coupon payments of $1000 until then. Assuming a 9% yield to maturity, how much is your inheritance worth today?

2. Your company wants to finance a new maintenance vehicle . The vehicle costs $25,000. You are offered an annual interest rate of 6% for a term of 5 years. What is your monthly payment?

3. Your company expects to make $10,000 as of today in sales, $12,500 at the end of one year, $15,700 at the end of the year after that and $20,900 the end of the year after that. Assuming a discount rate of 12%, what is the total present value of your projected sales?

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Beverley Smith
Beverley SmithLv2
28 Sep 2019

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1) Analysts predict that your company's earnings will grow at 40% per year for the next five years. After that, earnings growth is expected to slow to 2% per year and continue at that level forever. Your company has announced earnings of $2 million. What is the Present Value of all future earnings if the interest rate is 10%? (Assume all cash flows occur at the end of the year.)

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Central Development Company just paid a dividend of $3.00 per share. The company is in a very profitable growth mode and expects that its dividend will grow 10% annualy over the next four years. In the spirit of under promising and over delivering, Central Development has told investors that after the fourth year it expects the annual dividend to grow t a more reasonable rate of 2% per year. Currently, the risk free rate is 2.5%, the market risk premium is 6.5% and Central's beta is 0.8.

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Please Show Work.

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