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Question a
GoGoAUCity Inc. plans to issue a perpetual callable bond that pays 11.39% annual coupons. The current interest rate is 8%. Two years later, there is 16% probability that the interest rate will be 4.6%, 31% probability that the interest rate will be 10.1% and 53% probability that the interest rate will be 12.1%. The bond is callable at par value of 1,000 plus 3 additional coupon payments and it will be called if the bond price is greater than the call price.
Question b
CEGM Inc. currently has 8,200 shares outstanding, selling at $16.6 per share. Its 10.4% annual coupon, perpetual debt has a par value of $65,000 and is trading to yield 8.2%. The present value of the financial distress costs is $13,200. The annual EBIT is expected to be $40,000 forever. The tax rate is 30%.
If you expect those dividends to rise at 2% per year forever, and your discount rate on the stock is 10%, what is the price you would pay per share?
The coupon rate of a bond is the rate of return that an investor obtains by buying the bond in the market and holding it until the last cash flows are paid
what is the list price of the bond on the settlement date? What is the accrued interest on the bond? What is the invoice price of the bond?
A deposit of $710 earns interest rates of 10.1 percent in the first year and 7.1 percent in the second year. What would be the second year future value?
buyu manufacturing has been contracted to provide sael electronics with printed circuit and motherboards pc boards
Describe and discuss how these changes might impact stakeholder relationships your organization has with financial institutions and explain the roles of financial institutions in the global economy.
Describe the most effective countermeasures
Using the capital budget decision tools, discuss how decreasing interest rates can cause firms to make more investments.
If you purchased a $50 face value bond in early 2015 at the then current interest rate of .10 percent per year, how much would the bond be worth in 2025?
What is the formula to calculate the value of a firm BEFORE restructuring?
In each of the following situations assume a zero-growth rate for earnings and dividends (NPVGO is zero), that all earnings are paid out as dividends, and that the earnings-based valuation model is being used.
Why is it important for management to support and commit to risk management activities?
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