Work Shown

1. If you invest $16,900 today, how much will you have:
Use Appendix A.
(a) In 14 years at 11 percent? (Round “FV Factor” to 3 decimal places and final answer to the nearest dollar amount. Omit the “$” sign in your response.)
(b)
In 17 years at 6 percent? (Round “FV Factor” to 3 decimal places and final answer to the nearest dollar amount. Omit the “$” sign in your response.)
(c)
In 18 years at 10 percent? (Round “FV Factor” to 3 decimal places and final answer to the nearest dollar amount. Omit the “$” sign in your response.)
(d)
In 20 years at 10 percent (compounded semiannually)? (Round “FV Factor” to 3 decimal places and final answer to the nearest dollar amount. Omit the “$” sign in your response.)
2. What is the present value of:
Use Appendix B.
(a)
$8,500 in 11 years at 7 percent? (Round “PV Factor” to 3 decimal places and final answer to the nearest dollar amount. Omit the “$” sign in your response.)
(b)
$17,500 in 6 years at 8 percent? (Round “PV Factor” to 3 decimal places and final answer to the nearest dollar amount. Omit the “$” sign in your response.)
(c)
$27,000 in 17 years at 9 percent? (Round “PV Factor” to 3 decimal places and final answer to the nearest dollar amount. Omit the “$” sign in your response.)
3. Your aunt offers you a choice of $21,500 in 17 years or $980 today. Use Appendix B.
(a)
What is the present value of $21,500, if the money is discounted at 20 percent? (Round “PV Factor” to 3 decimal places and final answer to the nearest dollar amount. Omit the “$” sign in your response.)
(b)
Which choice would you choose?
4. If you invest $8,800 per period for the following number of periods, how much would you have:
Use Appendix C.
(a)
In 15 years at 8 percent? (Use the values provided in the table exactly as given (1, 2, or 3 decimal places). If you use another source for these compounding factors, round to three decimal places. Round your final answer to the nearest dollar amount. Omit the “$” sign in your response.)
(b)
In 40 years at 8 percent? (Use the values provided in the table exactly as given (1, 2, or 3 decimal places). If you use another source for these compounding factors, round to three decimal places. Round your final answer to the nearest dollar amount. Omit the “$” sign in your response.)
5. Mrs. Crawford will receive $8,500 a year for the next 15 years from her trust. Use Appendix D.
If an 10 percent interest rate is applied, what is the current value of the future payments? (Round “PV Factor” to 3 decimal places and final answer to the nearest dollar amount. Omit the “$” sign in your response.)
6. Annuity payments are assumed to come at the end of each payment period (termed an ordinary annuity). However, an exception occurs when the annuity payments come at the beginning of each period (termed an annuity due). To find the present value of an annuity due, subtract 1 from n and add 1 to the tabular value. To find the future value of an annuity, add 1 to n and subtract 1 from the tabular value. For example, to find the future value of a $100 payment at the beginning of each period for five periods at 10 percent, go to Appendix C for n = 6 and i = 10 percent. Look up the value of 7.716 and subtract 1 from it for an answer of 6.716 or $671.60 ($100 × 6.716). What is the future value of a 8-year annuity of $3,600 per period where payments come at the beginning of each period? The interest rate is 7 percent. Use Appendix C. (Round “FV Factor” to 3 decimal places and final answer to the nearest dollar amount. Omit the “$” sign in your response.)
7. The Lone Star Company has $1,000 par value bonds outstanding at 10 percent interest. The bonds will mature in 18 years. Use Appendix B and Appendix D.
Compute the current price of the bonds if the present yield to maturity is (Round “PV Factor” to 3 decimal places, intermediate and final answers to 2 decimal places. Omit the “$” sign in your response):
8. The preferred stock of Denver Savings and Loan pays an annual dividend of $8.10. It has a required rate of return of 9 percent.
Compute the price of the preferred stock. (Omit the “$” sign in your response.)
9. Stagnant Iron and Steel currently pays a $12.25 annual cash dividend (D0). It plans to maintain the dividend at this level for the foreseeable future as no future growth is anticipated.
If the required rate of return by common stockholders (Ke) is 18 percent, what is the price of the common stock? (Round your answer to 2 decimal places. Omit the “$” sign in your response.)
10. Laser Optics will pay a common stock dividend of $7.10 at the end of the year (D1). The required rate of return on common stock (Ke) is 18 percent. The firm has a constant growth rate (g) of 8 percent.
Compute the current price of the stock (P0). (Round your answer to 2 decimal places. Omit the “$” sign in your response.)