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A firm has $500,000 in accounts receivable. A commercial bank will accept these accounts receivable as collateral and will advance the firm 75% of the accounts receivable amount on loan at 6%. The bank charges a $5,000 credit checking fee. The firm will use the agreement for 90 days. What is the effective annual rate?
Explain the following terms and explain why they were important during the housing and credit crisis of 2007-2009. Securitization Subprime loan Asset write down 3.
q1. veezee vz issues a 2-year floating rate bond in the amount of 100m on which it pays libor6 - 0.5 semi-annually.
Annuities. A famous quarterback just signed a $15 million contract providing $3 million a year for 5 years. A less famous receiver signed a $14 million 5 years contract providing $4 million now and $2 million a year for 5 years. The interest rate is ..
Consider an asset that costs $624,000 and is depreciated straight-line to zero over its eight-year tax life. The asset is to be used in a five-year project; at the end of the project, the asset can be sold for $173,000. If the relevant tax rate is 35..
The Unlimited, a national retailing chain, is considering an investment in one of two mutually exclusive projects. The discount rate used for Project A is 12 percent. Further, Project A costs $15,000, and it would be depreciated using MACRS. What ris..
Appliance for Less is a local appliance store. It costs this store $22.02 per unit annually for storage, insurance, etc., to hold microwave in their inventory. Sales this year are anticipated to be 644 units. Each order costs $65. What is the average..
Your firm is contemplating the purchase of a new $759,500 computer-based order entry system. The system will be depreciated straight-line to zero over its seven-year life. It will be worth $49,000 at the end of that time. Suppose your required return..
Alabaster Incorporated has an equity cost of capital of 14%. The debt to value ratio is .6, the tax rate is 35%, and the cost of debt is 8%. What is the cost of equity if Alabaster was unlevered?
Crandal Dockworks is undergoing a major expansion. The expansion will be financed by issuing new 15-year, $1,000 par, 9% annual coupon bonds. The market price of the bonds is $1,070 each. Crandal's flotation expense on the new bonds will be $50 per b..
Which of the following describes residual claimants? A) they are paid first in default. B) they cannot lose money under current US law. C) They receive what is left after all other debts are settled. D)They are generally considered to be secured cred..
Breads ‘R Us had sales of $35,000 last year. Their total costs were $12,000, and the depreciation charge was $3,000. They have 1,480 shares outstanding and paid dividend of $2.20 per share after keeping 70 percent of the net income as retained earnin..
Suppose that you are the manager of a bank whose $100 billion of assets have an average duration of four years and whose $90 billion of liabilities have an average duration of six years. Conduct a duration analysis for the bank, and show what will ha..
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