EBK FUNDAMENTALS OF CORPORATE FINANCE
4th Edition
ISBN: 8220103631754
Author: Harford
Publisher: PEARSON
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Chapter 5, Problem 27P
Summary Introduction
EAR (Effective Annual Rate): The effective interest rate refers to the rate of interest that is paid on an investment or loan or bonds after to take into consideration of compounding over a period of time.
Mortgage: Mortgage is a way to finance an asset or premises by a fixed income secured loan. It becomes void when the loan is repaid in full. It is a term loan, usually for a long tenure.
Annual Percentage Rate 
Annual Percentage Rate is the simple interest earned in one year without the effect of compounding. It is the easiest way to quote an interest rate. It is expressed as the percentage that represents the actual annual cost of a loan for its tenure.
To Compute: The number of installments to pay off if additional $250 is paid for every installment.
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(d) Estimate the value of a share of Cisco common stock using the discounted cash flow (DCF) model as of July 27, 2019 using the following assumptions
Assumptions
Discount rate (WACC)
Common shares outstanding
7.60%
5,029.00 million
Net nonoperating obligations (NNO) $(8,747) million
NNO is negative, which means that Cisco has net nonoperating investments
CSCO
($ millions)
DCF Model
Reported
2019
Forecast Horizon
2020 Est.
2021 Est.
2022 Est.
2023 Est.
Terminal
Period
Increase in NOA
FCFF (NOPAT - Increase in NOA)
$
1241
1303
1368
10673
11207
11767
1437 $
12354
302 ✓
Present value of horizon FCFF
9918
9679
9445 ✔
0 ×
Cum. present value of horizon FCFF $
0 ×
Present value of terminal FCFF
0 ☑
Total firm value
0 ☑
NNO
-8747 ✓
Firm equity value
$
0 ☑
Shares outstanding (millions)
5029
Stock price per share
$
40.05
Don't used hand raiting and don't used Ai solution
Don't used hand raiting and don't used Ai solution
Chapter 5 Solutions
EBK FUNDAMENTALS OF CORPORATE FINANCE
Ch. 5 - Prob. 1CCCh. 5 - Prob. 2CCCh. 5 - Prob. 3CCCh. 5 - Prob. 4CCCh. 5 - What is the difference between a nominal and real...Ch. 5 - How are interest rates and the level of investment...Ch. 5 - Prob. 7CCCh. 5 - Prob. 8CCCh. 5 - Prob. 1CTCh. 5 - Why is the EAR for 6% APR, with semiannual...
Ch. 5 - Prob. 3CTCh. 5 - Prob. 4CTCh. 5 - Prob. 5CTCh. 5 - Prob. 6CTCh. 5 - Prob. 7CTCh. 5 - Prob. 8CTCh. 5 - Prob. 9CTCh. 5 - 1. You are considering a car loan with a stated...Ch. 5 - Your bank is offeringyou an account that will pay...Ch. 5 - 3. You are looking to buy a car and you have been...Ch. 5 - 4. You are considering two ways of financing a...Ch. 5 - 5. An online bank is offering to pay 0.25%...Ch. 5 - 6. Which do you prefer: a bank account that pays...Ch. 5 - 7. You have been offered a job with an unusual...Ch. 5 - You have found three investment choices for a...Ch. 5 - 9. Your bank account pays interest with an EAR of...Ch. 5 - 10. Suppose the interest rate is 8% APR with...Ch. 5 - Prob. 11PCh. 5 - Prob. 12PCh. 5 - Prob. 13PCh. 5 - 14. Suppose Capital One is advertising a 60-month,...Ch. 5 - 15. Assume you graduate from college with $30,000...Ch. 5 - Ironwood Bank is offeringa30-year mortgage with an...Ch. 5 - 17. You have just taken out a $20,000 car loan...Ch. 5 - Prob. 18PCh. 5 - 19. You are buying a house and the mortgage...Ch. 5 - 20. You have decided to refinance your mortgage....Ch. 5 - 21. You have just sold your house for $1,000,000...Ch. 5 - Prob. 22PCh. 5 - 23. You are thinking about leasing a car. The...Ch. 5 - 24. You have some extra cash this month and you...Ch. 5 - 25.You have an outstanding student loan with...Ch. 5 - 25. You have an outstanding student loan with...Ch. 5 - 27. Oppenheimer Bank is offering a 30-year...Ch. 5 - 28. Your friend tells he has a very simple trick...Ch. 5 - 29. The mortgage on your house is five years old....Ch. 5 - Prob. 30PCh. 5 - Your firm has taken out a $500,000 loan with APR...Ch. 5 - 32. Five years ago you took out a 5/1 adjustable...Ch. 5 - 33. In 1975, interest rates were 7.85% and the...Ch. 5 - 34. If the rate of inflation is 5%, what nominal...Ch. 5 - Prob. 35PCh. 5 - Prob. 36PCh. 5 - 37. You are pleased to see that you have been...Ch. 5 - 38. What is the shape of the yield curve given in...Ch. 5 - Prob. 39PCh. 5 - Prob. 40PCh. 5 - Prob. 41P
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