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1. You are choosing between a 15 year fully amortizing fixed rate constant payment loan with a 3.15% rate and a 30 year fixed rate loan with a 3.40% rate. In either case you would borrow $400,000. If you plan to only hold which ever loan you select for 10 years (i.e. you will make 120 payments), how much larger will the outstanding balance be at time of repayment on the 30 year loan versus the 15 year loan? State your answer as a positive number rounded to the nearest cent.
2. You wish to borrow $2,000,000 to finance the construction of a small multi-family investment property. A lender is willing to give you a 10 year fixed rate fully amortizing loan at 4.5%. In what month will you have paid back exactly half of your principal balance? Always round up to the nearest month, payments are always at discrete intervals (no payments will be made in the middle of any month). State your answer as a whole number. (Hint: you want to find the N when the outstanding balance is 1M and subtract that from 120, your total number of scheduled payments)
You are given the following information concerning Parrothead Enterprises: Debt: 10,800 7.3 percent coupon bonds outstanding, with 22 years to maturity and a quoted price of 108.5. Market: An expected return of 10.2 percent, a risk-free rate of 5.15 ..
Describe how NPV is calculated, and describe the information this measure provides about a sequence of cash flows. What is the NPV criterion decision rule? Why is NPV considered a superior method of evaluating the cash flows from a project?
Cesar Digital Systems has EBIT of $500,000, a growth rate of 5%, and faces a tax rate of 40%. In order to support growth, Cesar must reinvest 50 percent of its EBIT in net operating assets. What is the value of the firm’s tax shield?
What should be your FIRST action to improve your financial well-being? Which of the following is NOT a key to financial success identified by Skousen? Which of the following is NOT one of the three principles of financial success? Americans save more..
Duval Inc. uses only equity capital, and it has two equally-sized divisions. Division A's cost of capital is 10.0%, Division B's cost is 14.0%, and the corporate (composite) WACC is 12.0%. All of Division A's projects are equally risky, as are all of..
In the current year, Borden Company had sales of @2,030,000 and cost of goods sold of $1,215,000. Borden expects returns in the following year to equal 8% of sales. The unadjusted balance in Inventory Returns Estimated is a debit of $9,000, and the u..
Oberon, Inc., has a $15 million (face value) 8-year bond issue selling for 95 percent of par that pays an annual coupon of 7.95 percent. What would be Oberon’s before-tax component cost of debt?
Indicate whether each stock is overpriced, underpriced, or correctly priced.- Show how a smart investor could construct a portfolio of stocks C and D that would outperform stock A.
Pricing is a critical decision made by a marketing executive because price has a direct effect on a firm’s profits. Note the six major steps in the process organizations go through in setting prices on pages 322–323. Step one involves identifying pri..
Which of the following does NOT always increase a company’s market value?
Scott purchased 200 shares of Frozen Foods stock for $48 a share. Four months later, he received a dividend of $0.22 a share and also sold the shares for $42 each. What was his annualized rate of return on this investment?
What is collateral on a loan that remains in the possession of the borrower and not the bank?
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