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Five years ago, Sams Inc. issued $30000000 of 30 year, 11% coupon semi annual bonds which are callable at 110% of par value. Sams Inc is now considering refunding the issue because the market interest rate is now at 9%. Flotation costs on the old issue are being amortized on a straight line basis over the life of the bonds. The unamortized portion amounts to $375000. Flotation costs on the new bond issue would be 2%. (straight line amortization). The new issue would have a 25 year maturity. Sams Inc marginal tax rate is 40%. Should the bonds be refunded?
NewCo has 3 year pay-back rule for investments up to $40,000. Compute the pay-back period in years for following and indicate whether investment should be done.
You are looking at a new stock and would like to predict a few years of dividends before buying it. The company recently had a dividend of $1. For the next 3 years, dividends will grow 4% each year, 6% the following year and a constant growth every y..
Determine LaJolla Securities' profit on the offering if the secondary market price of the shares immediately after the offering began were as follows:
Suppose that the current one-year rate (one-year spot rate) and expected one-year T-bill rates over the following three years (i.e., years 2, 3, and 4, respectively) are as follows: 1R1 = 0.3%, E(2r 1) = 1.3%, E(3r1) = 10.4%, E(4r1) = 10.75% Using th..
The state government is facing a budget deficit due to low oil prices. Which tax would be likely to yield more revenues?
Suppose you pay $100,000 for an investment that will pay you $4,000 every six months. You can reinvest the 4,000 at an APR of 5%. Assuming in 10 years you will get back the $100,000, what is the EAR (effective rate of return) on your investment?
What was the standard deviation of the risk premium? What was the average risk premium?
Commercial payer/insurer Anthem has 95% of the market share in your region. You are the CFO of the regional hospital.
Using the relevant net cash flows and cost of capital from A above, calculate the NPV for the project.
The bond has a 7.50% nominal yield to maturity, but it can be called in 6 years at a price of $1,150. What is the bond’s nominal yield to call?
The above borrowing rates represent the borrowing rates the firms can obtain for a five year fixed rate debt issue in U.S. dollars or Swiss francs. Suppose XYZ wishes to borrow Swiss francs and LMN wishes to borrow U.S. dollars. LMN demands a 11 pct ..
Compute the bid and ask prices for the JPY/EUR ‘cross rate’ Compute the arbitrage profit that can be earned with $1,000.
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