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Company X wants to borrow $10,000,000 floating for 5 years; company Y wants to borrow $10,000,000 fixed for 5 years. Their external borrowing opportunities are as follows. Company X can borrow at 10% fixed or LIBOR floating. Company Y can borrow 12% fixed or LIBOR +1.5% floating. A swap bank quotes the following rates against the LIBOR:10.2% - 10.3%. The all in cost to firm X is ________%and the all in cost of firm Y is ____________% .
Charlie Stone wants to retire in 35 years(he is currently 22) and be able to withdraw $250,000 per year for 15 years. Charlie wants to receive the first payment at the end of the 35th year. Using annual interest rate of 10%, how much should Charlie d..
What is the amount of the operating cash flow for a firm with revenues of $1,000,000; expenses of 400,000; depreciation expense of $100,000; and a 35% marginal tax rate?
On January 1, 2006, Matt is obligated to make annual level payments for 16 years, beginning with a payment on January 1, 2007. His financial adviser told him that this liability has a Macaulay duration of 7.39 years. Determine the annual effective in..
Ward Corp. is expected to have an EBIT of $2,100,000 next year. Depreciation, the increase in net working capital, and capital spending are expected to be $169,000, $93,000, and $119,000, respectively. All are expected to grow at 18 percent per year ..
Assume a project has the following expected cash flows: What is the project’s payback (payback period)?
You are developing a proposal to open three new mexican restaurants around the Metro Detroit area over the next four years. The project requires a purchase of $800,000 of equipment with a four year useful life and a book value of zero at the end of t..
During 2014, Raines Umbrella Corp. had sales of $720,000. Cost of goods sold, administrative and selling expenses, and depreciation expenses were $500,000, $90,000, and $85,000, respectively. What is Raines’s net income for 2014? What is the company'..
You own a bond with the following features: 7 years to maturity, face value of $1000, coupon rate of 2% (annual coupons) and yield to maturity of 5.1%. If you expect the yield to maturity to remain at 5.1%, what do you expect the price of the bond to..
Suppose that at the present time, one can enter 5-year swaps that exchange LIBOR for 5%. An off-market swap would then be defined as a swap of LIBOR for a fixed rate other than 5%. For example, a firm with 10% coupon debt outstanding might like to co..
Company A is planning on increasing its annual dividend by 15% a year for the next 4 years and then decreasing the growth rate to 3.5% per year afterwards. The company just paid its annual dividend in the amount of $0.2 per share. Suppose the require..
Suppose each of two independent projects has a probability of 0.01 (or 1%) of a loss of $15 million and a probability of 0.99 (or 99%) of a loss of $2 million during a one-year period. Suppose that the traders have put the projects in the same portfo..
The company is choosing between machine A and B (they are mutually exclusive and the company can only pick one). The initial cost of machine A is $1,400,000 and it will last for 7 years before it needs to be replaced. Using the annuity factors, find ..
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