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Bond Ratings and Prices (LG7) A corporate bond with a 6.900 percent coupon has thirteen years left to maturity. It has had a credit rating of BB and a yield to maturity of 8.5 percent. The firm has recently become more financially stable and the rating agency is upgrading the bonds to BBB. The new appropriate discount rate will be 7.4 percent.
What will be the change in the bond’s price in dollars? (Assume interest payments are semiannual.) (Do not round intermediate calculations and round your final answer to 2 decimal places.) Change in bond price $
What will be the change in the percentage terms? (Do not round intermediate calculations and round your final answer to 2 decimal places.) Change in bond percent %
A firm has determined its optimal structure which is composed of the following sources and target market value proportions. Debt: The firm can sell a 15-year, $1,000 par value, 8 percent bond for $1,050. A flotation cost of 2 percent of the face valu..
Emily is in the 25% bracket and has $15,000 available for investment during her current tax year. Assume that she remains in the same tax bracket over the next 7 years and determine the accumulated amount of her investment if she puts the $15,000 int..
Has the inflation rate in the US increased or decreased in the past 5 years? Why? Have interest rates increased or decreased over that same period? Why? What can we likely expect of both in the near future?
Starting again with the conditions in part a, what is capital increases by 5% so that it is now 420. By how much does output increase?
Plyler Overhead Door has $1,747,000 in sales, generates a net profit margin is 9.3%, and the firm has 18,000 shares of stock outstanding. The company’s stock price is $130. What is its price to earnings ratio?
Consider a project with the following data: accounting break-even quantity = 11,250 units; cash break-even quantity = 10,000 units; life = seven years; fixed costs = $200,000; variable costs = $64 per unit; required return = 10 percent. Ignoring the ..
To buy a new house you must borrow $160,000. To do this you take out a $160,000, 30 year, 12% mortgage. Your mortgage payments, which are made at the end of each year (one payment per year), include the principal and 12% interest on the declining bal..
Which of the following is NOT part of the cost of capital?
Consider the following spot interest rates for maturities of one, two, three, and four years. r1 = 3.9% r2 = 4.5% r3 = 5.2% r4 = 6.0% Assuming a constant real interest rate of 2 percent, what are the approximate expected inflation rates for the next ..
You are a financial analyst for the Ajax Company, which uses about $1 million of inventory per month. The purchasing manager has come to you for help with a buying decision. He can get a big discount on $15 million of inventory by buying it all at on..
Bottoms Up Diaper Service is considering the purchase of a new industrial washer. It can purchase the washer for $3,000 and sell its old washer for $800. The new washer will last for 6 years and save $600 a year in expenses. what is the annual operat..
A company is considering a 5-year project that opens a new product line and requires an initial outlay of $78,000. The assumed selling price is $91 per unit, and the variable cost is $58 per unit. If the required rate of return is 11% per year, what ..
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