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Firm A can borrow at 4% fixed or at Libor flat in the fixed and floating rate markets, respectively. Firm B can borrow at 7% fixed or Libor plus 100 bps in the fixed and floating rate markets, respectively. A wants to borrow floating and B wants to borrow fixed. If A borrows fixed and B borrows floating and they enter into a fixed-for-Libor interest-rate swap in which A pays Libor flat, what is the range of fixed rates for B that enables each firm to improve its financing costs (compared to accessing financing in the market directly)? (a) 4%-7% (b) 4%-6% (c) 5%-6% (d) 5%-7%
The Last Gasp Water Company sells water by the gallon for a price of $0.75. Fixed coasts for the company are $200,000 , and variable coasts are $0.40 per gallon . the company already has $2,000,000 of 10% bonds on its balance sheet. Calculate the deg..
Use the following information to answer the next five questions (assume Co. tax rate of 35%): Debt - 50,000 bonds with 7.5 percent coupon rate, $1,000 par value, 20 years to maturity, selling for 96.3 percent of par; the bonds make annual coupon paym..
In order to fund her retirement, Michele requires a portfolio with an expected return of 0.11 per year over the next 30 years. She has decided to invest in Stocks 1, 2, and 3, with 25 percent in Stock 1, 50 percent in Stock 2, and 25 percent in Stock..
“Bob Pearson borrowed $30,000 from a bank at an interest rate of 9% compounded monthly. The loan will be repaid in 36 equal monthly installments over three years. Immediately after his 25th payment, Bob desires to pay the remainder of the loan in a s..
Dinklage Corp. has 5 million shares of common stock outstanding. The current share price is $84, and the book value per share is $7. The company also has two bond issues outstanding. What are the company's capital structure weights on a book value ba..
Marketing was a four letter word for not-for-profit organizations until about 20 years ago when organizations realized they needed to adopt business practices to better reach their audiences. How does marketing for a not-for-profit organization diffe..
A recent graduate is planning to acquire a new automobile for commuting to work in Atlanta. One option is to purchase a $25, 000 4-door sedan by paying the dealer $5, 000 at the time of purchase and financing the remaining $22, 000 to be repaid in 60..
Best Window & Door Corporation is considering the acquisition of Glassmakers Inc. Glassmakers has a capital structure consisting of $5 million (market value) of 11% bonds and $10 million (market value) of common stock. What discount rate should you u..
Construct a graph of this utility function (recall your excel?). Is this person risk averse, risk neutral, or a risk seeker?
Bourdon Software has 12 percent coupon bonds on the market with 16 years to maturity. The bonds make semiannual payments and currently sell for 108.8 percent of par. What is the current yield on the bonds? What is the YTM? What is the effective annua..
A child is born this year. On it's first birthday [after 1 year], the parents decide to deposit an equal annual contribution to the college fund that will earn 8%, compounded annually. How much should they deposit at the end of each year so that it w..
The next dividend payment by Halestorm, Inc., will be $1.64 per share. The dividends are anticipated to maintain a growth rate of 8 percent forever. The stock currently sells for $31 per share. What is the dividend yield? What is the expected capital..
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