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What is the present value of an ordinary annuity that pays $900 per year for 5 years, assuming the annual discount rate is 8 percent?

Corbett Manufacturing can invest in one of two mutually exclusive machines that will make a product it needs for the next 6 years.  Machine C costs $10 million but realizes after-tax inflows of $4.2 million per year for 3 years, after which it must be replaced.  Machine D costs $14 million and realizes after-tax inflows of $3.4 million per year for 6 years.  Based on the firm’s cost of capital of 11 percent, the NPV of Machine D is $383,829, with an equivalent annual annuity (EAA) of $90,728 per year.  Calculate the EAA of Machine C. Compare your result to that of Machine D and decide which to recommend.

The Harden Company’s cost of common equity is 12 percent, its before-tax cost of debt is 8 percent, and its marginal tax rate is 30 percent.  Given Harden’s market value capital structure below, calculate its WACC. Long-term debt $11,000,000 Common equity   39,000,000 Total capital $50,000,000

Clemson Software is considering a new project whose data are shown below. The required equipment has a 3-year tax life, after which it will be worthless, and it will be depreciated by the straight-line method over 3 years. Revenues and other operating costs are expected to be constant over the project’s 3-year life. What is the project’s Year 1 operating cash flow?   Equipment cost (depreciable basis) $65,000     Sales revenues, each year $60,000 Operating costs (excl. deprec.) $25,000 Tax rate 35.0%    

An annual coupon bond that matures in 15 years sells for $743.22.  It has a face value of $1,000 and a yield to maturity of 8 percent.  What is its current yield (CY)?

What is the present value of a perpetuity that pays $2,600 per year if the discount rate is 12.5 percent?

Susan recently received a credit card with a nominal interest rate of 19 percent.  With the card, she purchased some new clothes for $325.  The minimum payment on the card is only $10 per month.  If Susan makes the minimum monthly payment and makes no other charges, how long will it be before she pays off the card?

Sweeney Sailboats’ bonds have 20 years remaining to maturity.  Interest is paid annually; they have a $1,000 par value; the coupon interest rate is 10 percent; and the yield to maturity is 9.5 percent.  What is the bond’s current market price?

An investment will pay $1,000 at the end of each of the next 2 years, $800 at the end of Year 3, and $700 at the end of Year 4.  What is its present value if other investments of equal risk earn 10 percent annually?

An annual coupon bond that matures in 20 years sells for $670.76.  It has a face value of $1,000 and a yield to maturity of 10.5 percent.  What is its current yield (CY)?