# TCO

Question 3.3. (TCO G) Beranek Corp. has \$410,000 of assets, and it uses no debtâ€”it is financed only with common equity. The new CFO wants to employ enough debt to bring the debt to assets ratio to 40%, using the proceeds from the borrowing to buy back common stock at its book value. How much must the firm borrow to achieve the target debt ratio?

\$155,800

\$164,000

\$172,200

\$180,810

\$189,851

Question 4.4. (TCO B) Suppose a State of New York bond will pay \$1,000 10 years from now. If the going interest rate on these 10-year bonds is 5.5%, how much is the bond worth today?

\$585.43

\$614.70

\$645.44

\$677.71

\$711.59

Question 5.5. (TCO B) You sold a car and accepted a note with the following cash flow stream as your payment. Which was the effective price you received for the car, assuming an interest rate of 6.0%?

Years: 0 1 2 3 4

|———–|————–|————–|————–|

CFs: \$0 \$1,000 \$2,000 \$2,000 \$2,000 (Points : 10)

\$5,987

\$6,286

\$6,600

\$6,930

\$7,277

Question 6.6. (TCO B) Suppose you borrowed \$12,000 at a rate of 9.0% and must repay it in four equal installments at the end of each of the next 4 years. How large would your payments be?

\$3,704.02

\$3,889.23

\$4,083.69

\$4,287.87

\$4,502.26