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1. The spot US$/Euro exchange rate is US$1.2377/Euro. The 3-month forward rate is US$1.2020/Euro. What is Euro's forward premium (or discount) on the US dollar, expressed as an annual rate?
2. Ford Co. has the book equity value of $34,890 million. It also has 3,900 million shares outstanding. The industry average Market-to-Book ratio is 1.36. Based on the given information, what is the expected share price of the stock?
3. A company currently has the debt-to-equity ratio of 1/3. Its cost of debt is 4% before tax and its cost of equity is 12%. Assume that the company is considering raising the debt-to-equity ratio to 1/2. The tax rate is 20%. What is its new cost of equity under the new debt-to-equity ratio? What is its new weighted average cost of capital (WACC) under the new debt-to-equity ratio.
What is the main difference between a PLAM and an ARM? Briefly explain.
Bond Valuation with Semiannual Payments Renfro Rentals has issued bonds that have a 10% coupon rate, payable semiannually. The bonds mature in 15 years, have a face value of $1,000, and a yield to maturity of 9.5%. What is the price of the bonds?
The parents of a young child decide to make annual deposits into a college savings account.
You’ve just joined the investment banking firm of Dewey, Cheatum, and Howe. They’ve offered you two different salary arrangements.
A geometrically increasing series of 15 end of year payments is deposited to fund an account. Calculate the interest rate necessary to fund this account.
Your firm is contemplating the purchase of new $630,000 computer-based order entry system. If the tax rate is 30 percent, what is the IRR for this project?
Which areas require further analysis and investigation?
You have been asked to estimate the cost of capital for NewTel, a telecomm firm. Estimate the market value of debt for this firm.
what is the probability that a speculator who bought euros using the forward contract will lose money?
Jiminy's Cricket Farm issued a 30-year, 7 percent semi-annual bond 9 years ago. The bond currently sells for 89 percent of its face value. The book value of the debt issue is $16 million. The company's tax rate is 31 percent. What is the company's to..
If you were a billing manager what should you consider when implementing credit and collection policies?
Nanotech, Inc., has a bond issue maturing in seven years that is paying a coupon rate of 7.5 percent (semiannual payments). Management wants to retire a portion of the issue by buying the securities in the open market. If it can refinance at 6.0 perc..
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