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A company needs a new car and has the following options: (1) purchase the car cash or (2) lease the car. They are expecting to use the car for 2 years. If car is purchased for cash: • Cost new, $28,000 • Factory rebate available immediately, $4000 • Salvage value, $12,000 Costs for 2 year lease: • Amount due at signing, $3000 • Monthly lease payments, $400. The monthly payments are made at the beginning of the month (i.e. starting when n = 0) The company usually invests and borrows at 12% per year compounded monthly. Determine the equivalent monthly cost of each alternative. Note: the monthly beginning of the month lease payments need to be converted to end of the month equivalent payments. Which option is best?
A particular security's default risk premium is 4 percent. For all securities, the inflation risk premium is 3 percent and the real interest rate is 2.5 percent. The security's liquidity risk premium is 2 percent and maturity risk premium is 1 percen..
Residential Inc. produced substantial profits in the previous year. Assume that Residential pays 35% corporate income tax. If investors are taxed at 25% on ordinary income, and have 0% capital gains tax, would Residential’s common stock investors pre..
case studykoda private limited koda a privately owned company has been manufacturing electrical parts used in mobility
Calculate the present value of the following cash flows discounted at 10 percent.
A stock had returns of 20 percent, 12 percent, 14 percent, -10 percent, 16 percent, and 5 percent over the last six years. Required: What is the arithmetic return for the stock? What is the geometric return for the stock?
Collin purchases a house, using a loan from Big Bank. As a condition of the loan, Big Bank requires that Collin purchase life insurance payable to Big Bank, to the extent of the outstanding mortgage, if Collin dies before fully paying the mortgage. B..
A SPREAD is an investment strategy that involves the simultaneously buying and selling equal number of options on the same underlying security but with different strike prices
XYZ sold a call option on Canadian dollars for $.01 per unit. The strike price was $.76, and the spot rate at the time the option was exercised was $.82. Assume XYZ did not obtain Canadian dollars until the option was exercised. Also assume that ther..
What should be the prices of the following preferred stocks if comparable securities yield 6.5%? Why are the valuations different? a) Santa Fe Inc $ 2 preferred Stock ( $ 25 Par) b) Cessna Inc $ 2 preferred ( $ 25 Par) with mandatory retirement in 5 ..
A firm has 12,000 shares of common stock outstanding with a book value of $20 per share and a market value of $39. There are 5,000 shares of preferred stock with a book value of $10 and a market value of $26. There is a $400,000 face value bond issue..
Show that a firm with earnings of $10,000 a year in perpetuity would be better off paying all earnings in dividends rather than investing 25% of its earnings (also in perpetuity) in projects earning 14% if its discount rate is 15%
The correlation between stocks A and B is equal to the:
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