Question 3.3. (TCO G) Beranek Corp. has $410,000 of assets, and it uses no debt—it is financed only with common equity. The new CFO wants to employ enough debt to bring the debt to assets ratio to 40%, using the proceeds from the borrowing to buy back common stock at its book value. How much must the firm borrow to achieve the target debt ratio?

$155,800

$164,000

$172,200

$180,810

$189,851

 

 

Question 4.4. (TCO B) Suppose a State of New York bond will pay $1,000 10 years from now. If the going interest rate on these 10-year bonds is 5.5%, how much is the bond worth today?

$585.43

$614.70

$645.44

$677.71

$711.59

 

 

Question 5.5. (TCO B) You sold a car and accepted a note with the following cash flow stream as your payment. Which was the effective price you received for the car, assuming an interest rate of 6.0%?

Years: 0 1 2 3 4

|———–|————–|————–|————–|

CFs: $0 $1,000 $2,000 $2,000 $2,000 (Points : 10)

 

$5,987

$6,286

$6,600

$6,930

$7,277

 

 

Question 6.6. (TCO B) Suppose you borrowed $12,000 at a rate of 9.0% and must repay it in four equal installments at the end of each of the next 4 years. How large would your payments be?

$3,704.02

$3,889.23

$4,083.69

$4,287.87

$4,502.26

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