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Entergy, a large electric utility is looking to fix its cost of gas purchases over the next 3 years. Entergy currently buys gas in the spot market at the Henry Hub spot price. Entergy has received a proposal from Sempra Energy which would effectively fix the cost of Entergy’s gas purchases over the 3-year period via a fixed for floating (spot) swap contract, and the fixed swap price would equal $4.75 while the floating price would be the Henry Hub spot price.
a) Describe the flow of payments if both parties agree to the swap terms.
b) What is Sempra's market exposure after the swap is undertaken and what could they do to hedge it?
What is the cost of a preferred stock with a $100 par value that pays a $9.60 dividend per year? The security has a flotation cost of $3.37 and will be retired at its par value in 20 years 9.6% 5.9% 9.9% 10.6%
In 1895, the first a sporting event was held. The winner's prize money was $160. In 2007, the winner's check was $1,180,000. What was the percentage increase per year in the winner's check over this period? If the winner's prize increases at the same..
What is the biggest gap between theory and applications when estimating WACC? And in your opinion, what are the key reasons to form such a big gap?
Using the data in the following table, calculate the return for investing in Boeing stock fro January 2, 2008, to January 2, 2009, January 3,2011, to January 3, 2012, assuing all dividends are reinvested in the stock immediately.
Gary's Boutique has 4,000 shares of stock outstanding at a price per share of $19. The firm has decided to repurchase 500 of those shares in the open market. What will the price per share be after the share repurchase is completed? Ignore taxes and m..
In this assignment, you will compare and evaluate risk management techniques from experts in the field. Go to the Ashford University Library and find one article by Dr. James Kallman. Dr. Kallman, an expert in the field of risk management, has writte..
Which measure of risk is most relevant for an investor holding only one investment? Which measure is most relevant for an investor holding the stock as part of a well diversified portfolio?
The Seneca Children’s Fund (SCF) is a local charity that runs a summer camp for disadvantaged children. The fund’s board of directors has been working very hard over recent years to decrease the amount of overhead expenses, a major factor in how char..
Exchange rate systems vary in the degree to which a country’s central bank controls its currency’s exchange rate. This week’s discussion question centers on the use of foreign exchange markets. Discuss the four exchange rates forecasting methods and ..
Municipal bonds come in two general classifications: Revenue Bonds and General Obligation Bonds. What do these classifications mean and which of these municipal securities might you prefer? Why?
On her 25th birthday, a young woman engineer decides to start saving toward building up a retirement fund that pays 6% interest compounded monthly(the market interest rate). She feels that $1000000 worth of purchasing power in today's dollars will be..
Martha, a 75-year-old widow, owns more than $8 million in assets. Martha’s son, Jonathan, has two children, ages 10 and 13. Her daughter, Annie, also has two children, ages 9 and 13. What planning opportunities can you suggest so that Martha can prov..
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