Finance Worksheet

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Post A

Submit your answers to the following questions and cases located at the end of the chapter in the textbook:

Questions: 8.1, 8.2, 8.5, 8.7

Problems: 8.1, 8.2, 8.5, 8.7

• Questions: 9.4, 9.5
• Problems: 9.2, 9.4, 9.6
• Use the following information to answer question 1 and 2: Commonwealth Construction (CC) needs needs $1 million million of assets to get started, and it expects to have an EBIT of $400,000. CC will own no securities, all of its income will be operating income.CC chooses to finance 50% of its assets with debt, which will have an 8% interest rate. If it chooses to use debt, the firm will finance using only debt and common equity, so no preferred stock will be used. The taxi rate on taxable income is 40%.Question 1 (2 points):How much interest CC will pay?Question 2 (3 points):What is CC’s ROE?Question 3 (2 points):Moerdyk Corporation’s bonds have a 15-year maturity, a 7.25% semiannual coupon, and a par value of $1,000. The current interest rate is 5.00%. What is the bond’s price? (Write down the parameters you enter into the financial calculator.)
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