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Consider the following 2 bonds:
Bond A Bond B
Term to maturity 10 years 20 years
Face value $1000 $1000
Coupon (annually) 10% 10%
Repayment date last day last day
Make a table comparing the bond prices when market interest rates vary from 5%, 6%, …..17%, and discuss the price sensitivity of both bonds.
Paymaster Enterprises has arranged to finance its seasonal? working-capital needs with a? short-term bank loan.
What is the purchase price of a $1,000 bond that is maturing in 20 years at 12% interest if the required rate of return is 15%?
A firm has 2,000,000 shares of common stock outstanding with a market price of $2.00 per share. It also has 2,000 bonds outstanding, each selling at its par value of $1,000. The bonds have a coupon rate of 7%. The firm's equity beta is 1.2, the risk-..
Cochrane, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2,250,000. The fixed asset falls into the three-year MACRS class (MACRS Table). What is the net cash flow of the project for the fol..
There is an inverse relationship between bond prices and yields. This inverse relationship will be demonstrated by calculating bond prices to show that interest rates move inversely: if yields rise, then bond prices fall. Bonds will be sold either at..
If a firm's sales are $1,500,000 and it costs 9 percent to carry current assets, what is the potential savings if management can increase inventory turnover from 3 to 4 times a year and increase receivables turnover from 4.5 to 6 times a year?
The Poseidon Swim Company Produces swim trunks. The average selling price for one of their is $32.97. The variable cost per unit is $23.68, has an average fixed cost per year of $31,292. What is the breakeven point in dollar sales?
Assume that a business has an EBIT of $10 million, interest expense of $2 million, What is the estimate of the business’s equity value?
A small company wants to deposit a single amount of money so that it will have enough to purchase a new truck costing $50, 000 five years from now.
Assume that a share of stock will pay dividends of $2 in one year, $3 in two years, and $3.50 in three years. For all years after year 3, dividends will grow at a rate of 5%. If shareholders’ required rate of return is 15%, what will be the suggested..
Annie Hegg has been considering investing in the bonds of Atilier Industries. The bonds were issued 5 years ago at their $1,000 par value and have exactly 25 years remaining until they mature. They have an 8.0% coupon interest? rate, are convertible ..
Who owns a corporation? Describe the process whereby the owners control the firm’s management. Describe the main reason why an agency relationship exists in the corporate form of organization. In this context, describe the types of problems that can ..
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