Finance Answers

The following data was extracted from the marketing department in relation to the sales made after carrying out a number of promotions and fixing different prices.
Sales sh ‘millions’ 4 6 7 9 13 15
No of promotions 15 12 8 6 4 8
Selling price 30 24 20 14 10 4
i. Determine the equation of sales in relation to the number of promotions and price
ii. Determine the sales when the price is set at Sh 40 and the number of promotions is set at 10.

2.6 (6 points) Recently, Midrand Hospitals Inc. filed for bankruptcy. The firm was reorganized as American Hospitals Inc., and the court permitted a new indenture on an outstanding bond issue to be put into effect. The issue has 10 years to maturity and a coupon rate of 10 percent, paid annually. The new agreement allows the firm to pay no interest for 5 years. Then, interest payments will be resumed for the next 5 years. Finally, at maturity (Year 10), the principal plus the interest that was not paid during the first 5 years will be paid. However, no interest will be paid on the deferred interest. If the required annual return is 20 percent, what should the bonds sell for in the market today

2.5 (6 points) Marie Snell recently inherited some bonds (face value R100 000) from her father, and soon thereafter she became engaged to Sam Spade, a University of Florida marketing graduate. Sam wants Marie to cash in the bonds so the two of them can use the money to "live like royalty" for two years in Monte Carlo. The 2 percent annual coupon bonds mature on January 1, 2024, and it is now January 1, 2004. Interest on these bonds is paid annually on December 31 of each year, and new annual coupon bonds with similar risk and maturity are currently yielding 12 percent. If Marie sells her bonds now and puts the proceeds into an account which pays 10 percent compounded annually, what would be the largest equal annual amounts she could withdraw for two years, beginning today

2.3 You have been provided with the following options.
a. A 10-year, R1000 face value, 10 percent coupon bond with semiannual interest payments.
b. A 10-year, R1000 face value, 10 percent coupon bond with annual interest payments.
c. A 10-year, R1000 face value, zero coupon bond. d. A 10-year R100 annuity.
(3 points) Determine which one poses the highest price risk.

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

How does the equation for valuing a bond change if semiannual payments are made? Find the value of a 10-year, semiannual payment, 10 percent coupon bond if nominal rd =13

Assume that a firm is offered 2/10 net 30, indicating that if the account is settled in 10 days, the firm may keep a discount of 2%. If the discount is not taken, then the full amount is payable in 30 days.

3.1.1 Calculate the cost of foregoing the discount
3.1.2 Differentiate between the various aims of appraisal projects

Pukri Ltd is deciding whether to pay out R90000jn excess cash in the form of an extra dividend or a share repurchase. Current profits are R2,40 per share and the share sells for R20. Balance sheet before paying out the dividend.
Equity 240 000. Dept 160 000. Bank/Cash 90 000. Other assets 310 000. Evaluate each alternative by
1.1 calculating the number of shares in issue
1.2 the dividends per share
1.3.1 calculate the new share price
1.3.2 calculate the EPS
1.3.3 The price earnings ratio

On completion of her introductory finance course, Marla Lee was so pleased with the amount of useful and interesting knowledge she gained that she convinced her parents, who were wealthy alumni of the university she was attending, to create an endowment. The endowment is to allow three needy students to take the introductory finance course each year in perpetuity. The guaranteed annual cost of tuition and books for the course is $600 per student. The endowment will be created by making a single payment to the university. The university expects to earn exactly 6% per year on these funds.
a. How large an initial single payment must Marla’s parents make to the university to fund the endowment?
b. What amount would be needed to fund the endowment if the university could earn 9% rather than 6% per year on the funds?

Marian Kirk wishes to select the better of two 10-year annuities, C and D. Annuity C is an ordinary annuity of $2,500 per year for 10 years. Annuity D is an annuity due of $2,200 per year for 10 years.
a. Find the future value of both annuities at the end of year 10, assuming that Marian can earn (1) 10% annual interest and (2) 20% annual interest.
b. Use your findings in part a to indicate which annuity has the greater future value at the end of year 10 for both the (1) 10% and (2) 20% interest rates.
c. Find the present value of both annuities, assuming that Marian can earn (1) 10% annual interest and (2) 20% annual interest.
d. Use your findings in part c to indicate which annuity has the greater present value for both (1) 10% and (2) 20% interest rates.
e. Briefly compare, contrast, and explain any differences between your findings using the 10% and 20% interest rates in parts b and d.