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1. Rappaport Industries has 5,750 perpetual bonds outstanding with a face value of $1,000 each. The bonds have a coupon rate of 6.4 percent and a yield to maturity of 6.7 percent. The tax rate is 35 percent. What is the present value of the interest tax shield? Please show work
2. A German firm is attempting to determine the euro/pound exchange rate and has the following exchange rate information:
–USD/pound = $1.5509/£
–USD/euro rate = $1.2194/€
• What should be the euro/pound exchange cross rate without an arbitrage?
• If the spot euro/pound exchange rate is 1.30, explain how you can profit from it.
CRC stock has a required return of 18%. The expected market return is 14% and the risk-free rate is 5%. What is the beta of the CRC stock?
The introduction of a stylish line of Toyotas makes some consumers prefer foreign cars over domestic cars.
the cost of short-term funds was 9%. If the effect of this change was to delay check Clearing by 1 week what annual savings, if any, were realized?
The current discrete-time risk-free rate of return is 5%. What is the value of the option to abandon the mine?
Pizza Planet Co. paid a consultant to study the desirability of installing some new equipment.
Given that higher risk investments, such as small-company stocks, have outperformed other investments over time, why don't all investors choose to invest only in these high risk securities? Explain why the reward-to-risk ratio must be equal for all s..
What is the primary market? What is warrant? And If you Have a Warrant Should You be Disturbed?
The common stock of Answers Co. is currently trading at $58.1. The company just paid a $2.9 dividend to its shareholders, and targets a 4.7 percent growth rate in its dividends year over year. What is the discount rate that the market is using to pri..
Cass purchased 100 shares of Polar Tek stock on Monday, September 3. Polar Tek paid its quarterly dividend of $.80 a share on Friday, September 28. The record date was Wednesday, September 5. How much did Cass receive as a dividend payment on Septemb..
Compute the net present worth (NPW) of the cash flows described in table below for investment being considered by MGM Industries in Georgia.
Your firm has an average collection period of 39 days. Current practice is to factor all receivables immediately at a 2.00 percent discount. What is the effective cost of borrowing in this case?
Assume a clinical laboratory is considering a new test. Here are the key assumptions: annual fixed direct costs = $20,000, annual overhead allocation = $10,000, variable cost per test = $5, and expected volume = 5,000 tests. What price should be set ..
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