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Assume both corporate taxes and financial distress costs apply to a firm. Given this, the static theory of capital structure illustrates that:
1) a firm's value and its tax rate are inversely related.
2) the value of a firm rises as the interest rate on debt rises.
3) the maximum value of a firm is obtained when a firm is financed solely with debt.
4) a firm's value and its weighted average cost of capital are inversely related.
5) the value of a firm rises as both the interest rate on debt and the tax rate rise.
Choose a scenario of savings in a retirement plan such as a 401(k) or an annuity. Plan a monthly deposit (you choose the amount, but be realistic) for 5 years into an account that will earn interest at 5%. Find the future value for this account. Calc..
Consider the following yields (annual percentage rates with semi-annual compounding): Compute the coupon rate for a par 3-year coupon bond paying annual coupons.
You own a one-year call option to buy one acre of Los Angeles real estate. The exercise price is $2.12 million, and the current, appraised market value of the land is $1.82 million. You have a European call option. What is it worth of the European ca..
Linkup Systems, which provides investors with computerized information about stock prices, is considering the establishment of a lockbox system with its bank. If the lockbox system can save two days in the collection process, and the firms banker wil..
Suppose the current exchange rate for the Polish zloty is Z2.75. The expected exchange rate in three years is Z2.83. What is the difference in the annual inflation rates for the United States and Poland over this period? (Do not round intermediate ca..
Your uncle has $300,000 invested at 7.5%, and he now wants to retire. He wants to withdraw $35,000 at the end of each year, beginning at the end of this year. He also wants to have $25,000 left to give you when he ceases to withdraw funds from the ac..
Arts and Crafts Warehouse wants to issue 15-year, zero coupon bonds that yield 7.5 percent. What price should it charge for these bonds if the face value is $1,000? (Assume semi-annual compounding.)
Jeanie acquires an apartment building in 2003 for $260,00 and sells it for $500,000 in 2014. At the time of sale, there is $78,000 of accumulated straight-line depreciation on the apartment building. Assuming Jeanie is in the highest tax bracket for ..
What is the relationship between the two series? - Build a time series model using yields of AAA bond as the dependent variable and yields of BAA bond as independent variable.
Toto and Associates' preferred stock is selling for $27.50 per share. The firm nets $25.60 after issuance costs. The stock pays an annual dividend of $3.00 per share. What is the cost of existing, and new, preferred stock respectively?
what is the market value of NAB's assets?- What is weighted average cost of capital (WACC)- what is the return that preference share holders expect to earn?
A trader owns 55,000 units of a particular asset and decides to hedge the value of her position with futures contracts on another related asset. Each futures contract is on 5,000 units. What is the minimum variance hedge ratio? Should the hedger take..
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