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GoGoGUCity Inc. plans to issue a perpetual callable bond that pays 10.24% annual coupons. The current interest rate is 8%. Two years later, there is 28% probability that the interest rate will be 4.1%, 40% probability that the interest rate will be 9.8% and 32% probability that the interest rate will be 12.9%. The bond is callable at par value of 1,000 plus 2 additional coupon payments and it will be called if the bond price is greater than the call price.
A. Calculate the price of the callable bond.
B. What is the value of the call option?
C. What is the minimum coupon rate that the bond will be certainly called in two years?
Why do you think union membership has been declining? Do you think the downward trend will continue?
Tuggle Toy Company plans to expand its production capacity by adding a new machine costing $25,000, including installation and transportation costs.
How can dividends and repurchases be used to signal managers' information about their firms' prospects?
question carters preferred stock pays a dividend of 1.00 per quarter. if the price of the stock is 45.00 what is its
Assume ABC does reduce its production costs and map sales remain constant; how much more money can the company put into advertising (a fixed cost) and still break even?
The Florida Investment Fund buys 90 bonds of the Gator Corporation through a broker. The bonds pay 8 percent annual interest.
Calculate the effective cost of both proposals, and indicate which proposal should be accepted.
RealTimeService offers computer consulting, training and repair services. For the most recent fiscal year, profit was $230,000 as follows.
Jot down your questions as you read, and read with the idea that you are thinking of buying shares in that company.
You also think that the projects will not be funded until the WACC has increased, and their cash flows will not be affected by the change in economic conditions. Under these conditions, which of the following statements is CORRECT?
Assume a proposed new road to be created between two cities will lower the average cost per trip by car from $5 to $4. Currently, 500,000 trips are made between the two cities per year.
The next dividend payment by Blue Cheese, Inc., will be $1.52 per share. The dividends are anticipated to maintain a growth rate of 6 percent forever. If the stock currently sells for $28 per share, what is the required return?
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