Solution-Accepts the fixed-rate funds

Accepts the fixed-rate funds

Reference no: EM131101006

Please answer this question and briefly explain

Alles Ales (AA) and Barnicle Boats (BB) each need $5 million in funds and go to the market for quotes.

They are quoted: for AA - fixed: 7.4 per cent; floating: BBSW plus 2 per cent; for B - fixed: 8.8 per cent; floating: BBSW plus 2.2 per cent.

If AA accepts the fixed-rate funds and BB the floating-rate funds, then they both decide they can reduce their cost of funds through a swap, structure a swap where they both benefit equally.

	AA	BB
Pays to market	- 7.4%	-(BBSW + 2.2%)
Pays to other	- BBSW	- 6.0%
Receives from other	+ 6.0%	+ BBSW
Net result	BBSW + 1.4%	8.2%

Reference no: EM131101006

Questions Cloud

Operated cappuccino machines in japan : Your company is considering building a plant which produces coin-operated cappuccino machines in Japan. The project costs ¥ 1,000,000 (year 0) and is expected to generate a cash flow of ¥ 500,000, ¥ 600,000, and ¥ 400,000 in the next three followi..

Describe a public-key cryptography : Describe a public-key cryptography? George your definition of a mantrap you said it was a space with exit doors that don't open until the other is closed.

Alternative approach to budgeting : Explain to the other managers what method the company apparently used in the previous period and why the method created the lack of commitment. Also discuss flaws the alternative approach to budgeting.

Explain how this can be accomplished : We wish to improve the speed of the rectifier shown in Fig. 8.22(b) by connecting a diode from node Y to ground. Explain how this can be accomplished.

Accepts the fixed-rate funds : If AA accepts the fixed-rate funds and BB the floating-rate funds, then they both decide they can reduce their cost of funds through a swap, structure a swap where they both benefit equally.

Scenario steps to completion : The company's common stock is currently selling for $50 per share. The current dividend is $2.00 per share. If dividends are expected to grow at 6 percent per year, the average market return is expected to be 6% for the next several years

Provide examples that demonstrate the different situations : Explain how the people manage their language as compared to their cultural backgrounds, their gender, and their goals for interaction. Provide examples that demonstrate the different situations.

Weighted average cost of capital : Explore the cost of capital and the relationship that debt has to the weighted average cost of capital. Address the question, "if debt capital is the lower cost source of capital, why don't MNEs highly leverage their capital structure?"

Question regarding the firm net income : If accruals increased by $40,000, receivables and inventories increased by $190,000, and depreciation and amortization totaled $57,000, what was the firm's net income?

User Account

All Pages

Accepts the fixed-rate funds

Reference no: EM131101006

Reference no: EM131101006

Questions Cloud

Reviews

Write a Review

Finance Basics Questions & Answers

Financial reporting and analysis

A report on financial accounting

Describe the types of financial ratios

Differences between sole proprietorship and corporation

Prepare a cash budget statement

What are the implied interest rates

State pricing theory and no-arbitrage pricing theory

Small business administration

Effect of financial leverage

Evaluate the basis for the payment to the lender

Importance of opps, ipps, mpfs and dmepos

Time value of money

Assured A++ Grade

Academics

Major Subjects

Majors

Get In Touch

TERMS & POLICIES

HELP & SUPPORT