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The Faulk Corp. has a 6 percent coupon bond outstanding. The Gonas Company has a 14 percent bond outstanding. Both bonds have 12 years to maturity, make semiannual payments, and have a YTM of 10 percent. If interest rates suddenly rise by 2 percent, what is the percentage change in the price of these bonds? What if interest rates suddenly fall by 2 percent instead? What does this problem tell you about the interest rate risk of lower coupon bonds?
Hooper printing inc has bonds outstanding with 15 years left to maturity. You are entitled to 15 more interest payments since the bonds have an 8% semi annual coupon. Par value at issue is $1000. However, due to changes in interest rates, the bond's ..
Given the following information, complete the problems #6 and #7. Stock Strike Days to Maturity Risk Free Standard Variance Price Price By Days in Year Rate Deviation of Return $22 $24 120/365 0.08 0.25 0.0625 42 40 50/365 .10 .23. Use the Black-Scho..
Evaluate the performance of a company using various financial analytical tools and analyse different patterns of cost behaviour and apply cost-volume-profit analysis to business decisions.
Determine the value of the following firm. Identify the approach used. Comapny X is expected to have earnings of 100 in the beggining in the 10th year - this is when it begins its earnings. The industry the company is in is expected to have a P/E rat..
Company X owns a portfolio that is invested 19.04 percent in stock A, 39.26 percent in stock B, and the remainder in stock C. What is the expected return (in percents) on the portfolio? Stock A has an expected return of 13.99 percent and a beta of 1...
A year ago the Vanadian currency, the plumbum (VAP), had a mid-rate of VAP 6.5 to the dollar. Today it is VAP 8.7 per dollar. Has the VAP appreciated or depreciated against the dollar? By what percentage?
This caused the company to default on several contracts for rolling cabinets as it ran out of casters before it could secure replacements for the defective ones. Cabinet Co. was able to replace the casters at a 15% increase in cost.
Wachowicz Corporation issued 15-year, non callable, 7.5% annual coupon bonds at their par value of $1,000 one year ago. Today, the market interest rate on these bonds is 5.5%. What is the current price of the bonds, given that they now have 14 years ..
When additional shares of stock are issued, the earnings per share decreases(Assuming no change in total earnings). Explain how this occurs and what is the impact on a firm's decision to raise capital by equity, as opposed to debt.
Grace is waiting in her office to meet Joseph, the new sales representative for Powerslam shoe company. Joseph arrives promptly and Grace notices he is well-dressed, sounds intelligent, and has a firm handshake. Joseph immediately inquires about what..
A project has an initial cost of $40,000, expected net cash inflows of $9,000 per year for 7 years, and a cost of capital of 11%. What is the project's NPV? (Hint: Begin by constructing a time line)
The ABD company is considering replacing the latex molding machine it uses to fabricate rubber boots with a newer, more efficient model. The old machine has a book value of $450,000 and a remaining useful life of 5 years. ABD can sell it now to anoth..
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