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The Brandt Company has been approached by two different commercial paper dealers offering to sell an issue of commercial paper for the company.
Dealer A offered to market an $8 million issue maturing in 90 days at an interest cost of 8.5 percent per annum (deducted in advance). The fee to Dealer A would be $12,000.
Dealer B has offered to sell a $10 million issue maturing in 120 days at an interest rate of 8.75 percent per annum (deducted in advance). The fee to Dealer B would be $15,000.
Assuming that Brandt wishes to minimize the annual financing cost of issuing commercial paper, which dealer should it choose?
Strickler Technology is considering changes in its working capital policies to improve its cash flow cycle. Strickler's sales last year were $120,000 (all on credit), and it earned a net profit of 7%. Its inventory turnover was 4.8588 times during th..
E-Eyes.com has a new issue of preferred stock it calls 20/20 preferred. The stock will pay a $20 dividend per year, but the first dividend will not be paid until 20 years from today. If you require a return of 9.25 percent on this stock, how much sho..
You are 30 years old today and planning to retire at age 62. You want to plan your finances for living 35 years past age 62 and die dead broke. You determine you will need $3000 per month from age 62 for the 35 years. The expected return on your inve..
How much in new savings will Frank have available at age 65 before subsequent withdrawals? How much will he have left at age 90? What is the present value of that sum at age 65
In March 2015, Daniela Motor Financing (DMF), offered some securities for sale to the public. Under the terms of the deal, DMF promised to repay the owner of one of these securities $1,000 in March 2040, but investors would receive nothing until then..
If Julia's groceries cost $50 per week and she estimates her other expenses to be $150 per month, how much will she have left each month to put toward savings to reach her financial goals?
You plan to retire in exactly 22 years Your goal is to create a fund that will allow you to receive $ 20,000 at the end of each year for the 30 years between retirement and death?. What effect would an increase in the rate you can earn both during an..
Carnes Cosmetics Co.'s stock price is $45.32, and it recently paid a $1.50 dividend. This dividend is expected to grow by 27% for the next 3 years, then grow forever at a constant rate, g; and rs = 12%. At what constant rate is the stock expected to ..
As an employee, would you prefer to participate in a defined-benefit plan or a defined-contribution pension plan? Explain your answer, being explicit in considering the advantages and disadvantages of each plan, and which are most important to you.
Explain how the Federal Reserve Bank's (Fed) decision to raise interest rates would be expected to affect each component of the Weighted Average Cost of Capital (WACC). What four mistakes are commonly made when estimating the WACC, and how do these m..
A 4.85 percent coupon municipal bond has 22 years left to maturity and has a price quote of 103.70. The bond can be called in eight years. The call premium is one year of coupon payments. Compute the bond’s current yield. Compute the Yield to Maturit..
Angie invested $150,000 she received from her grandmother today in a fund that is expected to earn 10% per annum. To what amount should the investment grow in five years if interest is compounded semi-annually?
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