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Question - Today is Oct 4, 2018. ForeverLife, a biotech company, issued bonds on 4 Oct 2014 to finance the development of a new health care product. The Bonds were issued at par for 30 years (mature on 4 Oct 2044), with a face value of $1,000 and semi-annual coupons (payable in Apr and Oct every year). The coupon rate on these bonds is 8%. With the health product market becoming more and more competitive, ForeverLife's financial condition has been deteriorating consistently over the last few years.
Required -
a) As the risk associated with ForeverLife bonds is increasing dramatically, investors now require a 15% return to invest in the bonds. Determine the bond price trade at today right after the latest coupon payment.
b) Suppose ForeverLife has just admitted fraud today in its revenue reporting over the last 3 years. As a result, the bond price of the ForeverLife tumbled to $500. Estimate the new yield-to-maturity on the ForeverLife's bonds.
You have been asked to assess whether Walgreen Company, a drugstore chain, is correctly priced relative to its competitors in the drugstore industry.
Describe the risks that a potential multinational corporation may no longer face as it ceases to be a domestic corporation. Discuss total and unique risks for a potential multinational corporation.
The bonds make semiannual payments and have a par value of $1,000. If the YTM on these bonds is 5.6 percent, what is the current bond price?
1. Rahul and Miranda want to make a lump-sum investment for their newborn's college education, and their goal is to accumulate $80,000 in 18 years. What is the amount they must invest today to reach their goal if the annual rate of return is 8%?
Compare, contrast, and discuss the amount of dividends (calculated in part b) associated with each of the three capital expenditure amounts.
What if your job description required you to assign other employees to various work tasks or activities? Could you join a union?
The actual average price of a Big Mac in China is 20 RMB. What dollar price is implied by PPP? How do you explain the difference between the implied price
The Sun Co. and the Moon Co. have both announced IPOs at $40 per share. One of these is undervalued by $9 and the other is overvalued by $4.25 but you have no way of knowing which is which.
Mystic Lakes Food Company began investing in equity securities for the first time in 2011. During 2011, the company engaged in the following transactions involving equity securities.
If the samples that were obtained for each group are randomly selected and independent of one another which test should the restaurant owner use to test the difference between wait times for group A and group B?
Use a financial calculator or spreadsheet to help you figure out what Tim's monthly payment would be if the dealer were willing to finance the balance of the car price at a 9% annual rate.
Given the higher cost of issuing new preferred stock, the company is also considering a possibility of issuing new bonds.
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