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Suppose a firm has sales that are highly correlated with economic conditions. Short-term interest rates are also pro-cyclical. However, the firm wants to avoid the possibility that lenders may refuse to renew loan agreements if circumstances for the firm change for the worse (i.e., firm want to lock in the availability of credit). The firm will likely:
A-Issue LT debt and then enter into an IR swap in which it pays floating and receives fixed.
B-Issue LT debt and then enter into an IR swap in which it pays fixed and receives floating.
C-Issue ST debt and then enter into an IR swap in which it pays floating and receives fixed.
D-Issue ST debt and then enter into an IR swap in which it pays fixed and receives floating.
Spencer Supplies stock is currently selling for $60 per share. The firm is expected to earn $5.10 per share this year and to pay a year-end dividend of $3.70.
Beatrice Markets is expecting a period of intense growth and has decided to retain more of its earnings to help finance that growth. As a result, it is going to reduce its annual dividend by 30 percent a year for the next 2 years. After that, it will..
Suppose risk-free rate of return = 3%, market return = 9%, and Stock B’s return = 12%. Calculate Stock B’s beta. If Stock B’s betas were 0.80, what would be its new rate of return?
Three former college classmates have decided to pool a variety of work experiences by opening a store near campus to sell wireless equipment to students. The business has been incorporated as University Wireless. Several transactions occurred in Marc..
Maintenance costs for a regenerative thermal oxidizer have haven increasingly uniformly for 5 years. The cost in year 1 was $8,000 and it increased by $900 per year through year 5. Compute the present worth of the costs using an interest rate of 10% ..
Walter utilities is a dividend-paying company and is expected to pay an annual divident of $2.65 at the end of the year. what is the expected rate of return?
Which one of the following is the prime objective of a residual dividend policy? _______ Maintaining a stable dividend Increasing the dividend at a steady pace Meeting the firm's investment needs Maintaining a stable dividend payout ratio
Sam has just invested $35,000 for her newborn son in an education IRA. This money will be used for her son’s education 18 years from now. She calculates that she will need $200,000 by the time the boy goes to college. What rate of return will Lindsay..
Current T-bill yields are approximately 2 percent. Assume an investor considering the purchase of a newly issued three-month T-bill expects interest rates to increase within the next three months and has a required rate of return of 2.5 percent. Base..
Calculating Future Values [LO 1] You have just made your first $4,500 contribution to your individual retirement account. Assume you earn a 11.00 percent rate of return and make no additional contributions. What will your account be worth when you re..
KADS, Inc., has spent $350,000 on research to develop a new computer game. The firm is planning to spend $150,000 on a machine to produce the new game. Shipping and installation costs of the machine will be capitalized and depreciated; they total $45..
High electricity costs have made Farmer Corporation’s chicken-plucking machine economically worthless. Only two machines are available to replace it. The International Plucking Machine (IPM) model is available only on a lease basis. How much debt is ..
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