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The cash manager of Bronco, Inc., is contemplating the choice between using a wire transfer and an EDT. She estimates that her investment opportunity rate is 8 percent. The banks ECR is currently 5 percent and the reserve requirement is 12 percent. Her bank account officer informs her that a wire transfer will cost $20 and will provide collected balances one day earlier than the EDT which cost $0.75.
A. Assume that the balances transferred are above the balances required to compensate the deposit bank for services. Calculate the minimum transfer balance required to justify the use of a wire transfer.
B. Assume that the balances transferred are below the balances required to compensate the deposit bank. Calculate the minimum transfer balance required to justify the use of a wire transfer.
C. Why are the answers in two preceding parts different?
Citadel Holdings is experiencing rapid growth. Calculate the expected market price of the share in one year.
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Professor Wendy Smith has been offered the following opportunity: A law firm would like to retain her for an upfront payment of $50,000. In return, for the next year the firm would have access to eight hours of her time every month. What does the IRR..
Miller Von Enterprises' capital structure consists solely of debt and common equity. It can issue debt at rd = 10.6%, and its common stock currently pays a $1.91 dividend (D0= $1.91). What percentage of the company's capital structure consists of deb..
Consider the results. If the chosen firm grows at its internal growth rate, increasing assets only with its retained earnings, how will this likely affect its WACC? Show calculations.
You are an investor in company which is an auto parts supplier. They will pay a dividend next year of $0.80 per share and are expected to grow at an annual rate of 2%. The price of the stock is currently $37.24. What is the dividend yield? Why divers..
Given an optimal capital structure that is 50% debt and 50% common stock, calculate the weighted average cost for capital. Coupon rate on bonds: 9 %. Yield to maturity on bonds: 11% next expected dividend on common stock 3.00$, current price for comm..
One-year zero coupon treasury bonds are selling for £975.61 in the U.K. and for $963.86 in the U.S. Assume $1,000 face value in dollars for the U.S. bond and £1,000 face value for the U.K bond, and round interest rates to two decimal places, e.g. 2.5..
Which of the following should not be included in a schedule of cash flows from operations when evaluating a capital project? A. revenues B. sunk costs C. depreciation D. variable costs
Would you recommend borrowing from a bank at an 18 percent annual interest rate to take advantage of the cash discount offer? Explain your answer.
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