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A family currently live in an apartment whose monthly rent is $950. They are thinking of buying a house which would cost $220,000. They plan to live in this house for 5 years and sell it at the end of the 5th year. They would put a down payment of $20,000 and finance the balance through a mortgage at 3.5% interest rate. The mortgage is to be repaid in 5 annual instalments (which include both principal and interest) at the end of each year for the next 5 years The house will have the following additional expenses: annual maintenance: $1500; Property taxes:$5500; Insurance: $1200. Assume they are in tax bracket of 20% and the price of home, rent and expenditure increases by 2.5% per year. Their opportunity cost or required rate of return is 5% per year. Note that property taxes are tax deductible and there no tax payable on capital gains. Use annual compounding for amortization schedule of mortgage.
Calculate the Post tax Mortgage Cost (principal repayment plus after tax interest cost) for year 2.
Determine the cost of equity based on CAPM? Compute the firm's WACC? Estimate the cash flow for each year of this project
Assuming Home Depot's 2008 interest expense is $696 million Lowes' interest expense is $239 million and a 36 percent tax rate for both firms, what is their break-even level of operating income.
Hewitt Packing Company has an issue of $1,000 par value bonds with a 11 percent annual coupon interest rate. The issue has ten years remaining to the maturity date. Bonds of similar risk are currently selling to yield a 12 percent rate of return. The..
One year ago, Neal purchased 3,600 shares of Franklin stock for $101,124. Today, he sold those shares for $26.60 a share. What is the total return on this investment if the dividend yield is 1.7 percent?
What is the price of a U.S. Treasury bill with 56 days to maturity quoted at a discount yield of 1.20 percent? Assume a $1 million face value. (Round your answer to 2 decimal places. Omit the "$" sign in your response.)
What role do exchange rates play in attracting foreign investments and what currency policies do you recommend a policymaker implement in order to remain an attractive destination for foreign investments?
At the optimal debt to capital ratio of 50%, RAD has an interest coverage ratio of 2.198.Estimate the cost of capital at the optimal debt ratio. (You can still use that the current regression beta of 2.1 to arrive at the new beta)
A company currently has $3.50 earnings per share of which $1.05 is paid in annual dividends per share. If the growth rate for the firm is 4% per year and the required return is 9%, what is the theoretical P/E ratio?
Is the following statement true? The emergence of enterprise resource planning technology is essential to large multinational corporations and to the continued development of international business. Explain your response and give an appropriate examp..
How have changes in technology contributed to the globalization of markets and production? Would the globalization of production and markets have been possible without these technological changes? A democratic political system is an essential conditi..
Robert gillman, an equity research analyst at Gillman Advisors, believes in efficient markets, He has been following the mining industry for the past 10 years and needs to determine the constant-growth rate that he should use while valuing Pan Asis M..
You have purchased a call option contract on Smith & Smith common stock. The option contract is for 100 shares. The option has an exercise price of $ 43.00 and S&S’s stock currently trades at $40.00. The option premium is quoted at $ 2.00. If the sto..
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