Appendix B

Solutions to Selected End-of-Chapter Problems

CHAPTER 2 14 a. 1.33 years; 1.59 years

2 $98,150; $68,150 b. $257.51; $347.26
6 $415,000 c. 33.79%; 23.31%
10 $855,000 d. 15.86%
14 a. $61,120 18 a. 1.67 years; 1.63 years
b. $16,100 b. $607,287.75; $397,789.63
c. $1,950 c. 30.90%; 36.51%
d. $470 d. 25.52%
16 $393,000 22 25.00%; 33.33%; 42.86%; 66.67%

CHAPTER 3 CHAPTER 6
2 1.80 times; 17.46; $128,331 2 $1,553.87
6 11.61% 6 20.06%
10 8.53% 10 −$83,329.16; 2$82,554.30
14 23.27 days 16 $24,486,000
16 8.91 times 18 $1,266,667
22 $30,170.71
CHAPTER 4 28 $6,106,959; 27.54%
2 a. $1,628.89 32 $182.60
b. $2,593.74
c. $2,653.30 CHAPTER 7
4 6.13%; 10.27%; 7.41%; 12.79% 2 NPVBest = $2,475,317
10 a. $4,401.10 NPVWorst = −$969,375.68
b. $3,132.57 6 Go to market NPV = $23,000,000
c. $3,462.03 Test market NPV = $25,666,667
d. $3,826.13 10 7,043 units
14 $88,461.54; 4.69% 14 Payback = 2.97 years
18 EAR = 176.68% NPV = $14,246,367
22 4.14% IRR = 27.89%
26 $2,477,552 20 a. 1,018
30 $386,994.11 b. 1,622
34 $2,279,147
38 $385,664.73 CHAPTER 8
42 $3,700.77; 14.81% 2 a. $1,000
44 $134,455.36 b. $837.11
52 $11,571.48 c. $1,209.30
56 $18,451.74 6 3.34%
60 EAR = 17.65% 10 6.84%
64 APR = 35.71%; EAR = 42.18% 12 Current yield = 4.27%
YTM = 4.23%
CHAPTER 5 18 6.44%
2 3.81 years; 5.71 years; Never
6 10.38%; 19.16% CHAPTER 9
10 a. 12.40% 2 10.91%
d. −$293.70; $803.24 6 $3.91

982

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 Appendix B Solutions to Selected End-of-Chapter Problems 983

8 6.78% c. $9,855
13 $73.26 d. $1.29; $1.76; $1.89
18 $3.61 Breakeven = $9,855
22 $48.26 10 $3,330,000
29 a. $53.81 14 VU = $751,562.50
b. $60.09 V = $798,812.50

CHAPTER 10 CHAPTER 17
2 1.61%; 14.67% 3 $650,000
6 2.91%; 3.20% 8 a. $76,000,000
10 a. 6.14% b. 32.53%
b. 5.50% c. 16.14%
14 5.51%
20 Arithmetic average = 7.83% CHAPTER 18
Geometric average = 5.22% 2 $68,510.88
6 a. $1,256,127
CHAPTER 11 b. $1,149,131
2 12.81% 10 $5,845,477
6 E(R) = 10.50% 13 $4,020,681
sA = 8.64%
10 1.42 CHAPTER 19
14 10.44% 2 a. New shares issued = 3,000
18 Market risk premium = 7.30% b. New shares issued = 7,500
6 11,412; $38.75
CHAPTER 12 10 a. $106
2 a. 21.73% b. $110
b. 9.97% c. 40,909
5 F1 = 6.49% 14 a. $1,625,179
F2 = 5.64% b. $61.61
c. $1,625,179
CHAPTER 13 d. 496.63
2 8.67%; 5.57%
6 10.65% CHAPTER 20
10 a. 4.24% 2 a. $27
b. 13.36% b. 1,120,000; 2.59
14 b. 5.29% c. $26.44; $.56
c. $21,116,139 d. 27,000; 27,000
18 .4775 6 1,626,778
22 $6,251,949 12 20.10%
15 $28.15
CHAPTER 15
2 1,601 CHAPTER 21
6 $927.27 2 2$95,405.20
9 8.45% 6 $52,107.92
11 $119.73 10 $1,852,606
14 a. 2$46,247.78
CHAPTER 16 b. $930,668
2 a. $1.64; $2.73; $3.41
b. $.95; $2.66; $3.72 CHAPTER 22
6 a. $2.14; $2.94; $3.15 4 a. $13.33
b. $9,855 b. $2.60

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 984 Appendix B Solutions to Selected End-of-Chapter Problems

6 $5.54 6 a. $30,780
10 Call = $5.24; Put = $7.34 b. 2.49 days
14 $163,712.78 c. $30,780
18 $75.00 d. $5.71
22 Project A: Equity = $7,603.04; Debt = $19,896.96 e. $18,525
Project B: Equity = $5,921.30; Debt = $21,978.70 10 $3,710,000; $158,500
26 a. $9.38
b. .64; Borrow $40.77 CHAPTER 28
c. $9.38 2 $3,073,973
34 $10.58 6 10.1389 times; $591,097.22
10 $135,568.42
CHAPTER 23 14 $313,055
2 $1,298,460 18 $103.85
6 $258,609.04
10 $6,961,860 CHAPTER 29
2 Assets = $1,846,800
CHAPTER 24 6 Goodwill = $1,350
2 16.26 10 a. $2,300
5 $15 b. $36.48
10 a. $875.28 c. $7,200
b. 12.42 years d. $36.55
14 $803.05 e. $3,116.67
14 a. $4,875,000
CHAPTER 25 b. $11,875,000
2 2$5,075; $8,175 c. $9,000,000; $10,162,500
6 2.808 years d. NPVCash = $2,875,000
9 $11,200 NPVStock = $1,712,500
14 a. $498.85
b. $602.22 CHAPTER 30
4 3.519
CHAPTER 26
2 Cash = $820 CHAPTER 31
Current assets = $4,655 2 £ = $158.260
6 Operating cycle = 75.23 days SF/£ = 1.3957
Cash cycle = 33.55 days £/SF = .7165
10 Ending cash balance = $358,344; $457,690; 6 Great Britain = 2.04%
$679,018 Japan = 1.58%
Switzerland = 1.26%
CHAPTER 27 10 Kr/$ = 5.6658
2 a. Disbursement float = $68,000 14 $986,351.89
Collection float = 2$57,000
Net float = $11,000
b. Disbursement float = $68,000
Collection float = 2$28,500
Net float = $39,500

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