Weighted Mathtype Training – Finance

(1) Calculate the Future value of a sum of money having present value of $10,000
compounded monthly for 5 years at 12 % rate of interest

Future value = Present value X  1  r  n

 0.12 
 $10, 000   1  12  5
 12 
 $18,166.97

(2) Calculate the WACC of a capital structure of a firm having cost of equity of
10%, cost of preferred stock of 8% and cost of debt of 15%. The firm faces a tax
rate of 40% The equity ,preferred stock and debt and in a ratio 2:3:5
respectively .

Weighted average cost of capital

 (Weight of Equity  Cost of Equity)
 (Weight of Preferred stock  cost of preferred stock)
 (Weight of Debt  Cost of Debt (1-Tax Rate))

    
 2   3    5 
     10  15%  1  40%  
 10  10%    10  8%   
 8.9%

(3) Calculate yield to maturity of a bond trading at $750. The coupon

rate of the bond is 7% which is going to reach maturity in 10 years .
The face value of bond is $1,000.
Yield to maturity = coupon rate + Face Value – Market Price
Time to Maturity

Face value + Market Price

= 70 + 1000 -750
10
1,000 + 750
2

 10.86%