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Banner Insurance is a commercial property insurer that entered into a surplus-share reinsurance treaty with Anchor Re. Banner has a retention limit of $300,000 on any single building, and up to nine lines of insurance may be ceded to Anchor. An office building valued at $1,450,000 is insured with Banner. Several months after the policy was issued, a tornado caused a $650,000 loss to the building.
a. How much of the $650,000 loss will Anchor Re pay? Explain your answer and show your calculations.
b. What is the maximum amount of insurance the ceding insurer can write on any one building under the reinsurance agreement? Explain your answer and show your calculations.
The final purchase price is $400,000 and, if you need a mortgage from the bank, your down payment will have to be 20% of the purchase price. The mortgage is a 30-year fixed rate loan with an Annual Percentage Rate (APR) of 4.20%. Compute both the ann..
Explain, with examples, the key factors to be considered when formulating a working capital funding policy?
In making its capital-budgeting decisions for the average-risk project, the relevant cost of capital is:
Suppose a stock had an initial price of $56 per share, paid a dividend of $1.60 per share during the year, and had an ending share price of $66. Compute the percentage total return.
General Matter’s outstanding bond issue has a coupon rate of 9%, and it sells at a yield to maturity of 7.40%. The firm wishes to issue additional bonds to the public at face value. What coupon rate must the new bonds offer in order to sell at face v..
If the change in sales is the only consequence of this? decision, what are its costs and? benefits? Is it a good? idea??
Magic Flutes has total receivables of $3,600, which represent 20 days’ sales. Total assets are $78,000. The firm’s operating profit margin is 5.30%. Find the firm’s sales-to-assets ratio and return on assets.
What is their marginal tax rate? What is their average tax rate?
A proposed cost-saving device has an installed cost of $690,000. The device will be used in a five-year project but is classified as three-year MACRS property for tax purposes. The required initial net working capital investment is $40,000, the margi..
Downtown Deli has 2,000 shares of stock outstanding with a par value of $1 per share and a market value of $26 per share. The balance sheet shows $2,000 in the common stock account, $9,500 in the capital in excess of par account, and $14,500 in the r..
Net Working Capital and Capital Spending Klingon Could a business change in Net Working Capital be negative in a given year. Explain how this might happen? What about Net Capital Spending? (Same question and Explain)
How did the rise of the junk bond market help to increase the number of LBOs?
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