Module 4 (Graded A+) - use as a guide only - 18644

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Chapter 9

1. Find the future value one year from now of a $7,000 investment at

a 3 percent annual compound interest rate. Also calculate the future value if the investment is made for two years.

 

2. Find the future value of $10,000 invested now after five years if the annual interest rate is 8 percent.

a. What would be the future value if the interest rate is a simple interest rate?

 

b. What would be the future value if the interest rate is a compound interest rate?

 

5. Find the present value of $7,000 to be received one year from now assuming a 3 percent annual discount interest rate. Also calculate the present value if the $7,000 is received after two years.

 

10. Determine the present value now of an investment of $3,000 made one year from now and an additional $3,000 made two years from now if the annual discount rate is 4 percent.

 

20. Use a financial calculator or computer software program to answer the following questions.

a. What is the present value of $359,000 that is to be received at the end of twenty-three years, the discount rate is 11 percent, and semiannual discounting occurs?

 

b. How would your answer for (a) change if monthly discounting were used?

 

Chapter 10

 

1. Describe the relationship between internal and external financing in meeting the long-term financial needs of a firm.

 

2. What are the major sources of long-term funds available to business corporations? Indicate their relative importance.

 

26. “Taxes on capital gains can be deferred.” Explain what this statement means

 

Chapter 11

 

10. A U.S. firm wants to raise $15 million by selling 1 million shares at a net price of $15. We know that some say that firms “leave money on the table” because of the phenomenon of underpricing.

 

a. Using the average amount of underpricing in U.S. IPOs, how many fewer shares could it sell to raise these funds if the firm

received a net price per share equal to the value of the shares at the end of the first day’s trading?

 

b. How many less shares could it sell if the IPO was occurring in Germany?

 

c. How many less shares could it sell if the IPO was occurring in Korea?

 

 

d. How many less shares could it sell if the IPO was occurring in Canada?

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