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1. As a lender you have the option to give out two loans. Loan 1: $300,000 with administrative costs of $3,000. Loan 2: $900,000 with administrative costs of $6,000. Which loan is more profitable for the lender and why?
2. Which of the following will increase the net present value of a project?
a. An increase in the initial investment. b. A decrease in annual cash inflows. c. An increase in the discount rate. d. A decrease in the discount rate.
3. A company’s discount rate is based on the
a. cost of capital and the internal rate of return.
b. cost of capital and the risk element.
c. cut-off rate and the risk element.
d. cut-off rate and the internal rate of return.
Explain why the present value of a cash flow stream, and the asset associated therewith; fluctuate in value with the level of interest rates in the capital mark
What is Clapper's marginal tax rate based on the corporate tax rate table in this appendix?- What is Clapper's average tax rate?
Explain how a bank's credit risk and interest rate risk can affect its liquidity risk.
A firm has 3.00% semi-annual coupon bonds outstanding with a current market price of S777. The annual yield to maturity is 10% and the face value is $1, 000. Interest is paid semi-annually. How many years is it until these bonds mature?
The risk-free rate equals 7%, and the expected risk premium on the market portfolio equals 7%. What is the firm's WACC? What is the beta of the firm's assets?
AllCity, Inc., is financed 45% with debt, 7% with preferred stock, and 48% with common stock. What is its after-tax WACC?
Suppose your firm is considering investing in a project with the cash flows shown below, that the required rate of return on projects of this risk class is 10 %
Show your understanding of capital structure that you learnt in your corporate finance course in the MSc Finance and Investment programme at London School of Business and Finance.
Jefferson International’s debt is less expensive than its equity. If it could issue more debt without changing the cost of debt or equity, which of the following would occur?
The face value is 1000. The firms tax rate is 40 percent. What is the firms after tax cost of debt?
When the coupon rate of a bond is less than the discount rate, the bond sells at
Suppose that the current one-year rate (one-year spot rate) and expected one-year T-bill rates over the following three years (i.e., years 2, 3, and 4, respectively) are as follows: 1R1 = 0.3%, E(2r 1) = 1.3%, E(3r1) = 10.4%, E(4r1) = 10.75% Using th..
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