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Suppose that a small corporation wishes to build an office building and finance by issuing a 20 year bond at an annual interest rate of 10% to be paid annually. The construction will require three years and cost a total of $15 million, assuming that $5 million is spent at the end of each year. Short term cash funds can be deposited in an account having a 10% annual interest rate. The principal will be repaid at the end of 20 years. The activation fee for issuing the bond is $200,000. MARR is 15%
Estimate NPV, NFV, NUV, and cost ratio. Determine if the corporation should select this project.
Jack purchased a new home for $75,000. He paid $20,000 down and agreed to pay the rest in 20 equal annual payments, which include the principal payment plus 9% compound interest; payments are made at the end of the year. What will the payments be?
Travels Sailing, Inc. sells sailing trips at the seashore. Travels has asked for help in calculating its earnings available to common stockholders. The firm generated revenues of $35,000 from its products. The operating costs to produce the products ..
Assume market interest rates have risen substantially in the 5 years since an investor purchased Treasury bonds that were offering a 6% return over their 15-year life. If the investor sells now he or she is likely to realize a total return that is:
Your portfolio is 100 shares of Sunny Morning, Inc. The stock currently sells for $85.93 per share. The company has announced a dividend of $3.65 per share with an ex-dividend date of April 19. Assuming no taxes and no news or other surprises, how mu..
You have a contract that entitles you to receive $1 million 20 years from now. But can't wait and want your money now. You want to sell your contract. What is a fair price for it? Assume the risk free, inflation adjusted interest rate is 3% per year,..
Corvallis Corporation stockholders expect a growth rate of 4% in the company, and a dividend of $2.50 next year. The WACC of Corvallis is 11.5%. There are 5 million shares of the common stock, selling at $25 per share. The company also has $60 millio..
Smart Investment's last dividend was $1.75. It's dividend growth rate is expected to be constant at 25% for 2 years, after which dividends are expected to grow at a rate of 6% forever. It's required return (Rs) is 12%. What is the best estimate of th..
In March 2006, General Motors (GM) announced that it needed to restate its previous year's financial statement. Excerpts from the Wall Street Journal describing the restatements include: Many of the other GM problems relate to rebates, or credits, fr..
A 30-year maturity bond with face value of $1,000 makes semiannual coupon payments and has a coupon rate of 10%. What is the bond’s yield to maturity if the bond is selling for $1,060? What is the bond’s yield to maturity if the bond is selling for $..
During 2014, Paul sells residential rental property for $300,000, which is acquired in 1994 for $150,000. Paul has claimed straight-line depreciation on the building of $57,525. What is th4e amount and nature of Paul's gain on the sale of the rental ..
Which of the following statements about the "payback method" is true?
What is the approximate yield to call of a 10% coupon rate, $1,000 par value bond, currently priced at $1200, if the call can be made in seven years at a price of $1,025?
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