Make fixed-rate payments and variable-rate payments

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1. Explain what is working capital and sunk cost?

2. A bank has assets with an average duration of 3 years and liabilities with an average duration of 1.5 years. Should it be an interest-rate swap buyer (and make fixed-rate payments) or seller (and make variable-rate payments)? Explain.

 

3. The company has the following free cash flows for the next 4 years FCF1=-100, FCF2=-55, FCF3=-40, FCF4=150, after year 4, the growth rate of the FCF will be 10%, and the WACC=15%, then what the firm value should be?

Reference no: EM132073916

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