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A one-year-long forward contract on a non-dividend-paying stock is entered into when the stock price is $50 and the risk-free interest rate is 5% per annum (continuous compounding). (a) What are the forward price and the initial value of the forward contract? (b) Six months after the signing of the forward contract, the price of the stock is $55 and the risk-free interest rate is still 5%. What is the new market forward price for the same contract (which will now mature in 6 months)? What is the value of the forward contract signed 6 months ago?
MV Corporation has debt with market value of $99 ?million, common equity with a book value of $96 million and preferred stock worth $20 million outstanding.
You are evaluating two different silicon wafer milling machines. The Techron I costs $237,000, has a three-year life, and has pretax operating costs of $62,000 per year. The Techron II costs $415,000, has a five-year life, and has pretax operating co..
Calculate the Global Technology’s weighted cost of each source of capital and the weighted average cost of capital.
The three-month LIBOR rate two months ago was 9.8% per annum (compounded quarterly). What is the value of the swap?
Holden Corp. has an odd dividend policy. how much will you pay for a share today?
You will be paying $5,000 a year in tuition expenses at the end of the next 3 years. Bonds currently yield 30%. and if you plant to fund your obligation using a one-year zero-coupon bond and a perpetuity, how much of each of these bonds (in market va..
Prepare income statements and vertical common-size balance sheets for both companies - Prepare ratio analyses
Which of the following is NOT directly reflected in the cash budget of a firm that is in the zero tax bracket? a. Depreciation. b. Cumulative cash. c. Repurchases of common stock. d. Payment for plant construction. e. Payments lags.
If the required rate of return on the stock is 13.1 percent, what is its fair present value? what should the fair value be four years from today?
Atlantis Fisheries issues zero coupon bonds on the market at a price of $529 per bond. Each bond has a face value of $1,000 payable at maturity in 16 years. It is callable in 8 years at a call price of $650. Using semi annual compounding, what is the..
You just won the TVM Lottery. You will receive $1 million today plus another 10 annual payments that increase by $600,000 per year. Thus, in one year, you receive $1.6 million. In two years you get $2.2 million, and so on. If the appropriate interest..
Consider the decision you might have to make if you won a state lottery worth $105 million. Which would you choose: a lump-sum payment of %54 million today or a payment of $3.5 million each year for the next 30 years? At what opportunity cost would y..
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