Fundamentals of Financial Management (Concise 6th Edition)

Appendix B Answers to Selected End-of-Chapter Problems A-25

7-6 a. C 0! $1,012.79; Z 0! $693.04
C 1! $1,010.02; Z 1! $759.57
C 2! $1,006.98; Z 2! $832.49
C 3! $1,003.65; Z 3! $912.41
C 4! $1,000.00; Z 4! $1,000.00
7-8 15.03%
7-10 a. YTM! 9.69%
b. CY! 8.875%; CGY! 0.816%
7-12 a. YTM! 8%; YTC! 6.1%
7-14 a. 5 years
b. YTC! 6.47%
7-16 $1,067.95
7-18 a. TI! 6.1%; UPS! 3.65%

8-2 bp! 1.12
8-4 rM! 11%; r! 12.2%
8-6 a. rˆY! 14%
b. σX! 12.20%
8-8 b! 1.33
8-10 4.2%
8-12 a. ri! 15.5%
b(1). rM! 15%; ri! 16.5%
b(2). rM! 13%; ri! 14.5%
c(1). ri! 18.1%
c(2). ri! 14.2%
8-14 bN! 1.16
8-16 rp! 11.75%
8-18 a. $0.5 million
d(1). $75,000
d(2). 15%
8-20 a. rA! 11.30%; rB! 11.30%
b. rp Avg! 11.30%
c. σA! 20.8%; σB! 20.8%; σp! 20.1%
d. CVA! CVB! 1.84; CVp! 1.78

9-2 Pˆ 0! $6.25
9-4 a. end of Year 2
b. $37.80
c. $34.09
9-6 rp! 8.33%
9-8 a. $125
b. $83.33
9-10 $23.75
9-12 a(1). $9.50
a(2). $13.33
a(3). $21.00
a(4). $44.00
b(1). Unde! ned
b(2). #$48.00, which is nonsense
9-14 P 0! $19.89
9-16 6.25%
9-18 a. P 0! $54.11; D 1 /P 0! 3.55%;
CGY! 6.45%
9-20 $35.00

10-2 rp! 8%

10-4 a. rs! 15%

b. re! 16.11%

10-6 a. rs! 16.3%

b. rs! 15.4%

c. rs! 16%

d. rs Avg! 15.9%

10-8 rs! 16.51%; WACC! 12.79%

10-10 WACC! 11.4%

10-12 a. rs! 14.40%

b. WACC! 10.62%

c. Project A

10-14 11.94%

10-16 a. g! 8%

b. D 1! $2.81

c. rs! 15.81%

10-18 a. rd(1 – T)! 7%; rp! 10.20%;

rs! 15.72%

b. WACC! 13.86%

c. Projects 1 and 2 will be accepted.

10-20 a. rd(1 – T)! 5.4%; rs! 14.6%

b. WACC! 10.92%

11-2 IRR! 16%

11-4 4.34 years

11-6 a. 5%: NPVA! $3.52; NPVB! $2.87

10%: NPVA! $0.58; NPVB! $1.04

15%: NPVA! #$1.91; NPVB! #$0.55

b. IRRA! 11.10%; IRRB! 13.18%

c. 5%: Choose A; 10%: Choose B; 15%:

Choose neither one.

11-8 a. Without mitigation: NPV! $12.10

million and IRR! 19.86%; With

mitigation: NPV! $5.70 million and

IRR! 15.24%

11-10 Project A; NPVA! $30.16

11-12 IRRL! 11.74%

11-14 a. HCC; PV of costs! #$805,009.87

c. LCC; PV of costs! #$686,627.14

11-16 a. NPVA! $14,486,808; NPVB!

$11,156,893; IRRA! 15.03%;

IRRB! 22.26%

b. Crossover rate! 12%

11-18 a. No; PVOld! #$89,910.08;

PVNew! #$94,611.45

b. $2,470.80

c. 22.94%

11-20 $10,239.20

11-22 $250.01

12-2 a. $2,600,000

b. $2,000,000

c. $2,700,000

12-4 Yes, NPV! $15,301.10