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Agatha Concrete Company has been offered by its bank to manage its cash at a cost of $35,000 per year. Under the proposed cash management, the firm can reduce the cash required on hand by $180,000. Since the bank is also doing a lot of record keeping, the firm's administrative cost would decrease by $2,000 per month. What recommendation would you give the firm with respect to the proposed cash management assuming the firm's opportunity cost is 12 percent?
The personal auto policy contains several coverages that meet the insurance needs of typical insured individuals. For each of the following coverages, briefly describe the type of coverage provided, and give an example of a loss that would be covered..
Suppose that you read in The Wall Street Journal that a bond has a coupon rate of 9 percent, a price of 71.375% (of face value) , and pays interest annually. Rounded to the nearest whole percent, what would be the bond’s “current” yield? A 12-year bo..
Mythic Motors issued 8% coupon bonds that have 5 years to maturity. the bonds make semi-annual payments. If the yield to maturity on these bonds is 6%, what is the current price of the bonds?
El Paso Inc. has an unlevered beta equal to 0.7 and an equity beta equal to 1.4. The Debt-to-Value ratio is 70% and the corporate tax rate is 15%. What is the beta of debt? show your working
If you borrow $9,441 and are required to pay back the loan in five equal annual instalments of $2,750, what is the interest rate associated with the loan?
Quantix Corp has shares with a beta of 1.3. The risk free rate is 3% and the expected market return is 9%. Its tax rate is 30%. The company's shares currently trade for $45 a share. What is the company's estimated cost of retained earnings?
You own a stock portfolio invested 35 percent in Stock Q, 30 percent in Stock R, 20 percent in Stock S, and 15 percent in Stock T. The betas for these four stocks are .79, 1.17, 1.18, and 1.35, respectively. What is the portfolio beta?
If $120,000 is used to purchase an annuity due for next 5 years, in which the payment is made at the beginning of each period, and the interest rate (APR) is 10% compounded quarterly, find the amount of each payment.
Cowbell Corp. is a manufacturer of musical instruments. There are 51 million shares, each selling at $80 / share with an equity beta of 0.91. The risk-free rate is 5% and the market risk premium is 9%. There is $1.2 billion in outstanding debt (face ..
At December 31, 2014, Sager Co. had 1,200,000 shares of common stock outstanding. In addition, Sager had 450,000 shares of preferred stock which were convertible into 750,000 shares of common stock. During 2015, Sager paid $900,000 cash dividends on ..
Your firm has borrowed $15 million from a bank under the following terms: Payments are to be mode end of every quarter for next 25 years. Interest rate is 8.4% compounded quarterly. Prepare an amortization table using XL. What is the outstanding bala..
Smith & Company issued $80 million maturity value of 5-year bonds, which carried a coupon rate of 6% and paid interest semi annually. Calculate the gain or loss that Smith & Company will incur as a consequence of retiring the debt early. Is the ea..
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