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Profit from T-Bond :
Futures Egan Company purchased a futures contract on Treasury bonds that specified a price of 91-00. When the position was closed out, the price of the Treasury bond futures contract was 90-10. Determine the profit or loss, ignoring transaction costs.
Assuming a target capital structure of: 40% debt 20% preferred stock 40% common equity What would be the WACC given the following: all debt will be from the sale of bonds with a coupon of 10% (assume no flotation costs), preferred stock's associated ..
Lindsey Insurance Co. has current sales of $10 million and predicts next year’s sales will grow to $14 million. Current assets are $3 million and fixed assets are $4 million. The firm’s net profit margin is 7 percent after taxes. What are Lindsey's t..
Suppose the average return on an asset is 11.5 percent and the standard deviation is 20 percent. Further assume that the returns are normally distributed. Use the NORMDIST function in Excel to determine the probability that in any given year you will..
Quality Lumber is planning a major expansion program requiring $5,000,000 in financing. Quality may sell bonds with an 8% coupon rate or sell 200,000 shares of common stock to get the needed funds. Compute the DFL (Degree of Financial Leverage) under..
A company will buy 1000 units of a certain commodity in one year. It decides to hedge 80% of its exposure using futures contracts. Spot price and futures price are currently $100 and $90. The one year futures price of the commodity is $90. If the spo..
Saul Cervantes has just purchased some equipment for his landscaping business. For this equipment he must pay the following amounts at the end of each of the next five years: $9,722, $10,682, $14,734, $8,892, and $12,034. If the appropriate discount ..
Then apply those requirements to do an analysis of Brinker International, which is a real company. Don't complete the mini case itself, just Brinker. Do the analysis on the basis of the figures for the most recent year. For part g, use the 2 most rec..
A $1000 loan over a 10-year period earns an effective rate of interest of 9% per annum. Interest is paid each year as accrued and the principal is repaid at the end of ten years. If the repayments to the lender are reinvested at 7%, find the yield ra..
In case of conflict, one should always choose the IRR method (over the NPV method) because the IRR is inherently superior to the NPV method. For capital budgeting and cost of capital purposes, the firm should assume that each dollar of capital is obt..
Growth Enterprises believes its latest project, which will cost $99,000 to install, will generate a perpetual growing stream of cash flows. Cash flow at the end of the first year will be $7,000, and cash flows in future years are expected to grow ind..
What is the yield to maturity on a share of Hospitality Properties Trust B $2.22 preferred stock if an investor buys the stock at $35. Assume dividends are paid annually.
Calculate the price of a 6.7 percent coupon bond with 15 years left to maturity and a market interest rate of 8.5 percent. Is this a discount or premium bond?
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