Financial calculator question

Thanks everyone. Here was the original question:
“Trumpit Resorts Company currently has 1.2 million common shares of stock outstanding and the stock has a beta of 2.2. It also has $10 million face value of bonds that have five years remaining to maturity and 8 percent coupon with semi-annual payments, and are priced to yield 13.65 percent. If Trumpit issues up to $2.5 million of new bonds, the bonds will be priced at par and have a yield of 13.65 percent; if it issues bonds beyond $2.5 million, the expected yield on the entire issuance will be 16 percent. Trumpit has learned that it can issue new common stock at $10 a share. The current risk-free rate of interest is 3 percent and the expected market return is 10 percent. Trumpit’s marginal tax rate is
30 percent. If Trumpit raises $7.5 million of new capital while maintaining the same debt-to-equity ratio, its weighted average cost of capital is closest to:
A 14.5 percent.
B 15.5 percent.
C 16.5 percent.

Hi @student808‌ I believe FV should be the opposite sign of PV (since PV is generally what you pay and FV is what you receive at the end). I don’t know how you arrive at ‘it should be 7.999M’. To be honest when I enter the numbers you provide above I get PV = -5.185…M. Like @vincentt‌ says, can you post the full question please?

fmccray said:

How do you do 10C5 on the calculator? 

10 > 2nd > nCr > 5 > = 252

As far as I know @mm12 , FV and PMT have to be the same sign but it doesn’t matter if it’s negative or positive as long as PV is the opposite sign to FV & PMT.

@student808‌ 

We just released a CFA calculator guide that covers everything you need in 15 minutes. Calculating Present Value is covered quite thoroughly in the video:
https://www.youtube.com/watch?v=Ehchb6Zvag0

fmccray said:

I would like to do LN
25.21/25.20 on the calculator. It suppose to equal to 0.00397. i tired the
division first then, 2nd and LN. could not arrive to the same result.

Do you mean LN (25.21/25.20)? I got 0.0004. Divide 25.21/25.2, then LN (no ‘2nd’, at least on my BA II+)

@student808‌ you are getting the correct answer…i am gonna assume you haven’t understood this and hence explaining it below:
FV = $10,000,000, PMT = $400,000, N = 10, I/YR = 13.65%.
FV – amount recd at end of 10 years, after compounding at 13.65%
PMT – amount recd at end of each year for 10 years
assume, for a minute, that the PMT is 0. This becomes a very simple compound interest problem. The PV value returned would be -2,781,669.953
This implies that when you invest that PV amount, 10 years later you get the FV amount compounded at I/R annual compounding rate
now, consider your PMT value…every year, you will be withdrawing 400,000 from the account…so, in year 0, you would have to invest more than the PV value obtained in previous calculation in order to be able to withdraw PMT each year and at the same time get the entire FV at the end of 10 years…so, the PV amount would have to be more…this is obtained in your calculation to be 7,999,688, which is correct
As for the -ve sign, it implies that the money was spent by you. +ve sign implies money was recd by you…you can always revert the signs…

i hope the above answers your doubt

Lets first find that the debt-to-equity ratio at current market values for equity is 45% debt and 55% equity. In order to maintain the same debt-to-equity ratio, Trumpit must raise capital in the same ratio. So, $7500000 will be raised with 3.375 Million in debt and 4.125 Million in equity. Cost of equity will be RFR + Beta * (Market risk premium) = 3% + (2.2 * 7%) = 18.4%. Cost of debt is 16%, sans the interest saving. (16% and not 13.5% since they issue over 2.5 Million) So it is, 16% * (1-30%) = 11.2%. Then, the WACC is 18.4*(55/100) + 11.2*(45/100) = 15.16%. 

can a BA II PLUS calculator solve algebra such as the following?
80 = 100/(1 + r) ^10 
thank you!

Hi @student808‌ your answer of 4.896m seems correct. Would it be possible to provide the question, in case you missed out some crucial part in the question. For example, if the question mentioned semi annual coupon payment then your I/Y and N would be different.

Could you please provide the entire question. I found that  6.825 (13.65/2) solves the problem with N=10, Pv 7,999,687,FV= 10,000,000,pmt 400,000. You may have misread something or forgotten about using a period adjusted discount rate.

@student808, Well, I am deeply sorry. There is a mistake in my answer. The problem you are facing is that you haven’t accounted to semi-annual nature of the bonds that are currently in issuance. So, when you type I/Y and N type 13.65/2 and 10 respectively which should give you the correct answer of 7999688.