Ch 5 Questions 3 4 Question And Problems Section Microsoft

Ch 5 Questions 3 4 Question And Problems Section Microsoftexce

Ch 5 Questions 3 4 Question And Problems Section Microsoftexce

Ch. 5: Questions 3 & 4 (Question and Problems section): Microsoft ® Excel ® templates provided for Problems 3 and 4 Ch. 6: Questions 2 & 20 (Questions and Problems section) #2: Present Value and Multiple Cash Flows [LO1] Investment X offers to pay you $4,700 per year for eight years, whereas Investment Y offers to pay you $6,700 per year for five years. Which of these cash flow streams has the higher present value if the discount rate is 5 percent? If the discount rate is 15 percent? #20: Calculating Loan Payments [LO2, 4] You want to buy a new sports coupe for $79,500, and the finance office at the dealership has quoted you an APR of 5.8 percent for a 60-month loan to buy the car. What will your monthly payments be? What is the effective annual rate on this loan? Ch. 7: Questions 3 &11 (Questions and Problems section) 3: Valuing Bonds [LO2] Even though most corporate bonds in the United States make coupon payments semiannually, bonds issued elsewhere often have annual coupon payments. Suppose a German company issues a bond with a par value of €1,000, 23 years to maturity, and a coupon rate of 5.8 percent paid annually. If the yield to maturity is 4.7 percent, what is the current price of the bond? #11: Valuing Bonds [LO2] Union Local School District has a bond outstanding with a coupon rate of 3.7 percent paid semiannually and 16 years to maturity. The yield to maturity on this bond is 3.9 percent, and the bond has a par value of $5,000. What is the price of the bond? Ch. 8: Questions 1 & 6 (Questions and Problems section): Microsoft ® Excel ® template provided for Problem 6 #1: Stock Values [LO1] The Jackson–Timberlake Wardrobe Co. just paid a dividend of $1.95 per share on its stock. The dividends are expected to grow at a constant rate of 4 percent per year indefinitely. If investors require a return of 10.5 percent on The Jackson–Timberlake Wardrobe Co. stock, what is the current price? What will the price be in three years? In 15 years? #6: Stock Valuation [LO1] Suppose you know that a company’s stock currently sells for $63 per share and the required return on the stock is 10.5 percent. You also know that the total return on the stock is evenly divided between a capital gains yield and a dividend yield. If it’s the company’s policy to always maintain a constant growth rate in its dividends, what is the current dividend per share?

Paper For Above instruction

The assignment encompasses a series of financial analysis problems, primarily focused on the application of Excel templates, discounted cash flow calculations, bond valuation, and stock valuation. The tasks involve comparing present values of different cash flow streams, calculating car loan payments and effective annual rates, valuing bonds with different payment structures, and determining stock prices based on growth assumptions and dividend policies. Each problem requires a solid understanding of core finance principles such as present value calculations, bond pricing formulas, and the dividend discount model (DDM).

To begin, the problem involving the present value of two cash flow streams at different discount rates illustrates fundamental time value of money (TVM) concepts. Investment X's eight annual payments of $4,700 and Investment Y's five annual payments of $6,700 must be discounted at both 5% and 15%. This exercise demonstrates how higher discount rates diminish present values and emphasizes the importance of discount rate sensitivity in investment valuation. Calculating the present value involves summing the discounted cash flows using the formula PV = CF / (1 + r)^t, where CF is the cash flow, r the discount rate, and t the period.

The second problem pertains to loan amortization, where a vehicle purchase of $79,500 financed over 60 months at 5.8% APR requires calculating monthly payments and the effective annual rate (EAR). The monthly payment formula derives from the annuity formula, which considers the loan amount, interest rate, and number of payments. The EAR, reflecting the true cost of borrowing, accounts for compounding frequency within a year, calculated as (1 + APR/n)^n - 1, where n equals the number of compounding periods per year.

Bond valuation problems involve calculating present values of future coupon payments plus the face value, discounting at the bond's yield to maturity (YTM). The German bond's price considers annual coupon payments and its YTM, with the formula summing the present value of each coupon plus the discounted face value. The U.S. bond with semiannual coupons uses a similar approach but incorporates semiannual compounding, requiring adjustment of the coupon rate, YTM, and periods accordingly.

Stock valuation tasks hinge on dividend discount models and growth assumptions. For Jackson-Timberlake Wardrobe, the current stock price is derived using the Gordon Growth Model: P0 = D1 / (r - g), where D1 is the dividend next period, r the required rate of return, and g the growth rate. Future stock prices are projected based on anticipated dividend growth, considering the same model. The second stock task involves reverse-engineering the current dividend based on the current stock price, required return, and the assumption of constant dividend growth, where the stock's total return is split evenly between dividends and capital gains.

References

  • Brigham, E. F., & Ehrhardt, M. C. (2019). Financial Management: Theory & Practice (15th ed.). Cengage.
  • Damodaran, A. (2012). Investment Valuation: Tools and Techniques for Determining the Value of Any Asset. Wiley.
  • Ross, S. A., Westerfield, R., & Jaffe, J. (2016). Corporate Finance (11th ed.). McGraw-Hill Education.
  • Fabozzi, F. J. (2016). Bond Markets, Analysis, and Strategies (9th ed.). Pearson.
  • Lee, C., & Rhoads, K. (2020). Principles of Corporate Finance (8th ed.). Pearson.
  • Higgins, R. C. (2018). Analysis for Financial Management (11th ed.). McGraw-Hill Education.
  • Moyer, R. C., McGuigan, J. R., & Kretlow, W. J. (2012). Contemporary Financial Management (12th ed.). Cengage Learning.
  • Bernstein, P. L. (2013). Capital Ideas Evolving. Wiley.
  • Koller, T., Goedhart, M., & Wessels, D. (2015). Valuation: Measuring and Managing the Value of Companies (6th ed.). Wiley.
  • Artz, D. (2021). Financial Calculations and Valuations. Academic Press.

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