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An investor supplies 20 acres of land in exchange for stock and a mortgage note. The land has been appraised at $70,000 and the investor receives 15,000 shares of stock and a note with a face value of $55,000. The note requires Beacon to pay interest at the rate of 10% per year and the principal (face amount) is due in 5 years.
1. if a firm raises capital by selling new bonds it would be called the issuing firm and the coupon rate is usually set
Assuming continuous compounding, suppose the risk-free rate is 5.96 percent, and the dividend yield on the index is 2.75 percent. Is the futures overpriced or underpriced?
what is the most you should be willing to pay for a share of this stock? What price would you expect to be able to sell a share of Acap stock for in one year?
Suppose your local government decided to tax the interest income on its own bonds as part of an effort to rectify serious budgetary woes. If, before the change in tax status, the yields on the bonds described were below the Treasury yield of the same..
The regular payback does not consider cash flows beyond the payback year, but discounted payback overcomes this defect. The discounted payback method recognizes all cash flows over a project's life, and it also adjusts these cash flows to account for..
Compute the yield to maturity of a $2,500 par value bond with a coupon rate of 7.95% (quarterly payments – that is, four times per year) that matures in 25 years. The bond is currently selling for $3,265.
The fair market value of the interest retained by the grantor of a GRAT is subject to gift tax.
Suppose your firm is considering two mutually exclusive, required projects with the cash flows shown below. The required rate of return on projects of both of their risk class is 12 percent, and that the maximum allowable payback and discounted payba..
"A Treasury bond futures contract settled at 97'16." Calculate the present value of one futures contract? Are current market interest rates higher or lower than the standardized rate on a futures contract? Explain.
A Japanese company has a bond outstanding that sells for 96 percent of its ¥100,000 par value. The bond has a coupon rate of 6.3 percent paid annually and matures in 19 years. What is the yield to maturity of this bond?
Multinational firms can reduce their tax liability through transfer pricing. Countries that adopt a fixed exchange rate give up control of their monetary policy. If the shareholders gain from a merger comes at the expense of other stakeholders, then..
A company is considering a 5-year project to open a new product line. A new machine with an installed cost of $80,000 would be required to manufacture their new product, which is estimated to produce sales of $70,000 in new revenues each year. what i..
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