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A store offers two payment plans. Under the installment plan, you play 25% down and 25 % of the purchase price in each of the next 3 years. If you pay the entire bill immediately, you can take a 10% discount from the purchase price.
Which is better deal if you can borrow or lend funds at a 5% interest rate?
How will your answer change if the payments on the 4-year installment plan do not start for a full year?
Advantage First Corporation has sales of $4, 801, 450; income tax of $335, 853; the selling, general and administrative expenses of $263, 434; depreciation of $332, 240; cost of goods sold of $2, 737, 730; and interest expense of $170, 640. What is t..
Maple Aircraft has issued a convertible subordinated debenture at 6.00% interest due 2020. The conversion price is $64.00 and the debenture is callable at 104.00% of face value. By how much does the common have to rise by 2020 to justify conversion?
An investment offers to pay you $300 per quarter for 10 years. If the annual rate is 11% with quarterly compounding, then what is the present value of these cash flows?
Titan Mining Corporation has 9.9 million shares of common stock outstanding, 430,000 shares of 6 percent preferred stock outstanding, and 225,000 8.7 percent semiannual bonds outstanding, par value $1,000 each. what rate should the firm use to disco..
The term structure of interest rates is affected by which of the following? I. Interest rate risk premium II. Real rate of interest III. Default risk premium IV. Inflation premium
Jiminy's Cricket Farm issued a 30-year, 10 percent semiannual bond 7 years ago. The bond currently sells for 86.5 percent of its face value. The company’s tax rate is 35 percent. What is the pretax cost of debt? %? What is the aftertax cost of debt? ..
You invest in a portfolio of 5 stocks with an equal investment in each one. The betas of the 5 stocks are as follows: .75, -1.2, .90, 1.3, 1.5. The risk free return is 4% and the market return is 9%. (Not a multiple choice problem) Compute the beta o..
On March 16, the June T-bond futures contract was priced at 100 17/32 and the September contract was at 99 17/32. Determine the implied repo rate on the spread.
Assume that your firm's marginal tax rate is 35% and that your firm has the following capital structure: Bonds coupon rate = 6% yield-to-maturity = 5.5% Market value of bonds = $25 million Book value of bonds = $30 million. What is your firm’s Weight..
On September 1, 2009, Susan Chao bought a motorcycle for $26,000. She paid $1,200 down and financed the balance with a five-year loan at a stated annual interest rate of 6.8 percent, compounded monthly. She started the monthly payments exactly one mo..
A company's 5-year bond are yielding 7.75% per year. The real risk-free rate (r*) is 2.3%. The average inflation premium is 2.5%; and the maturity risk premium is estimated to be 0.1 x (t-1)%, where t= number of years to maturity. If the liquidty pre..
Consider following strategy: Write both a put and a call on Tesla stock with strike prices of $35. The price of the call and put are $3 and $5 respectively. (a) Draw the payoff diagram for this strategy. (b) Draw the profit diagram for this strategy...
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