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Two companies, Energen and Hastings Corporation, began operations with identical balance sheets. A year later, both required additional fixed assets at a cost of $25,000. Energen obtained a 5-year, $25,000 loan at a 10% interest rate from its bank. Hastings, on the other hand, decided to lease the required $25,000 capacity for 5 years, and a 10% return was built into the lease. The balance sheet for each company, before the asset increases, follows: Current assets $ 25,000 Debt $ 50,000 Fixed assets 125,000 Equity 100,000 Total assets $150,000 Total claims $150,000 Show how Hastings's balance sheet would look immediately after the financing if it capitalized the lease. Round the debt ratio to the nearest whole percentage. Hastings Corporation Balance Sheet (Capitalizes lease) Current assets $ Debt $ Value of leased asset Lease Obligation Fixed assets Equity Total assets $ Total claims $ Debt ratio = %
You agreed to provide consulting services to ABC Corporation. The agreed price to be paid to you for these services is $90,000. You have performed the service, have requested payment, and ABC Corporation has refused payment disputing the value and th..
What is the value of a bond that has a par value of $1000, a coupon rate of 17.24% (paid annually), and that matures in 8 years. Assume a required rate of return on this bond is 13.53%.
Determine the optimal leverage or optimal leverage range of the TPG telecom and whether the firm should increase, decrease or maintain its current leverage.
Which of the following provides the greatest annual interest? If you have $20,000 in an account earning 8% annually, what constant amount could you withdraw each year and have nothing remaining at the end of five years?
Consider the following two mutually exclusive projects: Year Cash Flow (X) Cash Flow (Y) 0 −$16,600 −$16,600 1 6,640 7,150 2 7,220 7,800 3 4,740 3,490 Requirement 1: (a) What is the IRR of Project X? What is the crossover rate for these two projects?
john and jane doe are senior vice presidents of insurance mutual of tampa. they co-manage the equity investments for
Assume you are at the beginning of 2001. The real risk-free rate of interest is 3 percent and expected to remain constant. Inflation is expected to be 2 percent, 3 percent, 4 percent, and 5 percent in years 2001, 2002, 2003, and 2004, respectively. T..
Suppose a European call option to buy a share for $22.00 costs $1.50. The stock currently trades for $19.00. If the option is held to maturity under what conditions does the holder of the option make a profit?
Based on economists’ forecasts and analysis, one-year T-bill rates and liquidity premiums for the next four years are expected to be as follows: Identify the four annual rates.
Curtis is considering a project with cash inflows of $918, $867, $528, and $310 over the next four years, respectively. The relevant discount rate is 11 percent. What is the net present value of this project if it the start up cost is $2,100?
Find the yield to maturity for a 20 year, 6% annual coupon rate, $1,000 par value bond if the bond sells for $1,185 currently? We assume that interest is paid on this bond every six months. (2) what's the bond's current yield? What’s its capital gain..
A firm is considering an investment in a new machine with a price of $18 million to replace its existing machine. The current machine has a book value of $6 million and a market value of $4.5 million. The new machine is expected to have a four-year l..
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