Financial – FIN 571 Week 5

The publishing company expects the sales to grow at a rate of 15.0
percent for the next three years, and by 6.0 percent in the fourth year.
Calculate the total number of copies that the publisher expects to sell in year
3 and 4._________

Find the present value of $4,800 under each of the following rates
and periods.

a. 8.9 percent compounded monthly for five years. Present Value
$ _________

b. 6.6 percent compounded quarterly for eight years. Present
Value $ _________

c. 4.3 percent compounded daily for four years. Present Value $
_________

d. 5.7 percent compounded continuously for three years. Present
Value $ _________

Problem 6.19

Trigen Corp. management will invest cash flows of $876,660,
$634,483, $483,288, $818,400, $1,239,644, and $1,617,848 in research and
development over the next six years. If the appropriate interest rate is 7.25
percent, what is the future value of these investment cash flows six years from
today? Future value $ ____________ 

Problem 6.27

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 $522,000 today, plus $522,000 at the end of each of the
following six years for permission to do this. If the appropriate interest rate
is 6 percent, what is the present value of the cash flow stream that the
company is offering you? Present Value $ _______

Problem 7.16

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

0.4

25.00%

Good

0.1

15.00%

Level

0.4

10.00%

Slump

0.1

-5.00%

What is the expected return on Barbara’s investment? Expected
Return _________ 

Problem 8.24

Trevor Price bought 10-year bonds issued by Harvest Foods five
years ago for $1,004.19. The bonds make semiannual coupon payments at a rate of
8.4 percent. If the current price of the bonds is $1,096.35, what is the yield
that Trevor would earn by selling the bonds today? Effective annual yield
________ % 

Problem 9.15

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 13.0 percent? Current price $ ___________