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Backwater Corp. has 9 percent coupon bonds making annual payments with a YTM of 8.3 percent. The current yield on these bonds is 8.65 percent. How many years do these bonds have left until they mature?
If the appropriate interest rate is 8.16 percent, what is the future value of these investment cash flows six years from today?
The Border Crossing has no debt and a cost of capital of 11.2 percent. Assume the firm switches to a debt-to-equity ratio of .25 and issues bonds at par with a 6.3 percent coupon. What will be its cost of equity after the switch? Ignore taxes.
Explain the concepts of business risk and financial risk. Identify factors that affect each. Explain the concept of financial leverage. Identify advantages and disadvantages of using financial leverage within a company.
Suppose you just bought a 25-year annuity of $7,200 per year at the current interest rate of 9 percent per year. What is the value of your annuity today? Present value $ What if interest rates suddenly rise to 14 percent? Present value $ What happens..
Calculate the cost of capital for Rio Tinto and state two reasons for why it may have declined since the GFC. Justify your answers using theory, calculations and research into current events.
Beckett, Inc., has no debt outstanding and a total market value of $200,000. Earnings before interest and taxes, EBIT, are projected to be $24,000 if economic conditions are normal. If there is strong expansion in the economy, then EBIT will be 15 pe..
How does reinvestment risk differ from interest-rate risk? Identify and explain the four factors that influence asset demand. Which of these factors affect total asset demand and which influence investors to demand one asset over another?
Heginbotham Corp. issued 10-year bonds two years ago at a coupon rate of 8.7 percent. The bonds make semi annual payments. If these bonds currently sell for 108 percent of par value, what is the YTM?
Brenda found out that reputable lenders use the 28/36 rule when determining mortgage qualification. Brenda currently grosses $6,000 per month. From this she pays a $200 car payment; a personal loan of $100 and a student loan payment of $90. Based on ..
A firm's stock is selling for $77. The next annual dividend is expected to be $4.00. The growth rate is 7%. The flotation cost is $8. What is the cost of retained earnings?
Edison Electric Systems is considering a project that has the following cash flow and WACC data. What is the project's MIRR? Define the difference between the MIRR and the IRR.
Amongst other things, the management has asked him to work in the stores issuing and accounting for equipment issued to Aggressive's employees. Alan feels that he has not been trained to do this and has given in his notice.
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