Fundamentals of Corporate Finance 2nd. Edition by Jonathan Berk, Peter DeMarzo, Jarrad Harford | 9780132148238 | 0132148234 | Holooly

Fundamentals of Corporate Finance [EXP-50970]

182 SOLVED PROBLEMS

Question: 6.8

A bank is offering 12 percent compounded quarterly. If you put $100 in an account, how much will you have at the end of one year? What’s the EAR? How much will you have at the end of two years?

Verified Answer:

The bank is effectively offering 12%/4=3% every qu...

Question: 6.13

A common arrangement in real estate lending might call for a 5-year loan with, say, a 15-year amortization. What this means is that the borrower makes a payment every month of a fixed amount

Verified Answer:

The monthly payment can be calculated based on an ...

Question: 2.1

A firm has current assets of $100, net fixed assets of $500, short-term debt of $70, and long-term debt of $200. What does the balance sheet look like? What is shareholders’ equity? What is net working capital?

Verified Answer:

In this case, total assets are $100+500=$600 and t...

Question: 14.5

A firm is considering a project that will result in initial aftertax cash savings of $5 million at the end of the first year. These savings will grow at the rate of 5 percent per year.

Verified Answer:

Assuming a 34 percent tax rate, the firm should ta...

Question: 9.4

A project has a total up-front cost of $435.44. The cash flows are $100 in the first year, $200 in the second year, and $300 in the third year. What’s the IRR? If we require an 18 percent return, should we take this investment?

Verified Answer:

We’ll describe the NPV profile and find the IRR by...

Question: 6.5

After carefully going over your budget, you have determined you can afford to pay $632 per month towards a new sports car.

Verified Answer:

To determine how much you can borrow, we need to c...

Question: 2.4

Algernon, Inc., has a taxable income of $85,000. What is its tax bill? What is its average tax rate? Its marginal tax rate?

Verified Answer:

From Table 2.3, we see that the tax rate applied t...

Question: 13.7

An asset is said to be overvalued if its price is too high given its expected return and risk. Suppose you observe the following situation:

Verified Answer:

To answer, we compute the reward-to-risk ratio for...

Question: 6.S-T.3

Annuity Present Value You are looking into an investment that will pay you $12,000 per year for the next 10 years. If you require a 15 percent return, what is the most you would pay for this investment?

Verified Answer:

The most you would be willing to pay is the presen...

Question: 6.S-T.4

APR versus EAR The going rate on student loans is quoted as 8 percent APR. The terms of the loans call for monthly payments. What is the effective annual rate (EAR) on such a student loan?

Verified Answer:

A rate of 8 percent APR with monthly payments is a...

Loading...