Estimate required rate of return for the bond

Assignment Help Financial Management
Reference no: EM131957321

Permian Underground Machines & Pipes Co. (PUMP) is in the oil and gas equipment and services industry. It is considering a new oilfield services operation in the Permian Basin. This project would require an outlay of $50 million. Suppose that PUMP hires Moody’s to assess the company’s credit quality if it were to issue the bonds. Moody’s advises PUMP that it would rate its bonds as Ba. Managers at PUMP consider issuing a 20-year bond. Currently, the yield on a U.S. Treasury bond with about 20 years to maturity is 1.81%. Estimate the required rate of return for the bond that PUMP managers are considering.

Reference no: EM131957321

Questions Cloud

The annual market interest rate for bond drops : Suppose that the annual market interest rate for this bond drops by 1%. What is the new bond price?
Evaluate lenscrafters operations strategy : Evaluate LensCrafters' operations strategy and explain how the organization seeks to gain a competitive advantage in terms of sustainability.
Corresponding percentage change in the price of the bond : Calculate the corresponding percentage change in the price of the bond using the approximation method base on bond duration.
Provide a brief summary of your hbcp : Provide a brief summary of your HBCP including why you choose it/what you hoped to gain from implementing it.
Estimate required rate of return for the bond : Estimate the required rate of return for the bond that PUMP managers are considering.
What is the financial break-even level for the project : What is the financial break-even level for the project? What is the accounting break-even level for the project?
Explain what are your strengths and weaknesses : When it comes to facilitating spiritual care for patients with worldviews different from your own, what are your strengths and weaknesses?
What is the dollar price of this bond : The FINRA web site lists the price of a bond as 84.12. If par of the bond is $1,000, what is the dollar price of this bond?
Explain the development of health insurance in the us : explain the development of health insurance in the United States. Include a brief discussion as to the current state of both traditional health insurance.

Reviews

Write a Review

Financial Management Questions & Answers

  Foreign company acquisition

Acquisition by a foreign company and the effects of that decision and the results of foreign exchange in Euro and the exchange rate differences.

  Financial management for profit and non profit organizations

In this essay, we are going to discuss the issues of financial management in a non-profit organisation.

  Method for estimating a venture''s value

Evaluate venture's present value, cash and surplus cash and basic venture capital.

  Replacement analysis

This document show the Replacement Analysis of modling machine. Is replacement give profit to company or not?

  Business finance task - capital budgeting

Your company is considering using the payback period for capital-budgeting. Discuss the advantages and disadvantages of this technique.

  Analysis of the investment

In this project, you will focus on one of these: the additional cost resulting from the purchase of an apple press (a piece of equipment required to manufacture apple juice).

  Conduct a what-if analysis

Review the readings and media for this unit, including the Anthony's Orchard case study media. Familiarise yourself with the Anthony's Orchard company and its current situation.

  Determine operational expenditures

Organisations' behaviour is guided by financial data. In the short term, such data will help determine operational expenditures; in the long term, historical data may help generate forecasts aimed at determining strategic plans. In both instances.

  Personal financial management

How much will you have left over each half year if you adopt the latter course of action?

  Sources of finance for expansion into new foreign markets

A quoted company is considering several long-term sources of finance for expansion into new foreign markets.

  Long term financial planning

This assignment is designed for analyze Long term financial planning begins with the sales forecast and the key input in the long term fincial planning.

  Explain the role of fincial manager

This assignment explain the role of fincial manager, function of manger. And what are the motives of financial manager.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd