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You buy a 4-year certificate of deposit, a 4-year par bond, and finance a 4-year consumer loan. Assume all these types of investment has 8% yield or interest rate. Say you have $8,000.
1. Assuming all types of lending compound at annual frequency, calculate the duration of each method of investment.
2. If interest rates of all time horizon increase by the same amount, say 2%, value of which type of investment loses the most?
This case focuses on the potential expansion opportunity of Hansson Private Label (HPL), a mid-size producer of private label personal care products.
wxMaxima Industries just paid an annual dividend of $1.44 a share. The market price of the stock is $24.62 and the firm promises a constant growth rate in dividends of 3.5 percent. What is the firm's cost of equity?
You company is deciding whether to keep an existing machine or replace the machine with a newer model. If the firm buys the new machine, the following information applies. What is the free-cash flow for the machine in year 1?
Shared services organizations treat operating business units within the same company as customers. At least three questions arise in this context: Should business units be free to contract with outside vendors for shared-services activities? Should s..
Your firm is contemplating the purchase of a new $850,000 computer-based order entry system. The system will be depreciated straight-line to zero over its five-year life. It will be worth $75,000 at the end of that time. You will save $320,000 before..
Dismal Outlook is unable to obtain financing for any new projects under any circumstances. This company is faced with: Turner Industries started a new project three months ago. Sales arising from this project are significantly less than anticipated. ..
Normally, in a healthy rental market, one would expect what relationship between the "going-in" and "going-out" cap rate?
What is the Net Present Value of this project using a discount rate of 10%?
Suppose a firm has sales that are highly correlated with economic conditions. Short-term interest rates are also pro-cyclical.
The present value of an annuity is commonly used:
The Baumol-Tobin cash management model The Chen Co. has determined that its operating circumstances are quite suitable for use of the Baumol-Tobin cash management model. What is the company’s optimum cash order quantity? What is the company’s optimum..
A convertible bond gives the bondholder the right to exchange the bonds for a preset number od shares of stock. a warrant is a security that often sold with bonds but that can be detached (bought and sold separately) from the bond. most preferred sto..
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