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Assume you have a 1-year investment horizon and are trying to choose among three bonds. All have the same degree of default risk and mature in 10 years. The first is a zero-coupon bond that pays $1,000 at maturity. The second has an 8% coupon rate and pays the $80 coupon once per year. The third has a 10% coupon rate and pays the $100 coupon once per year. a) If all three bonds are now priced to yield 8% to maturity, what are their prices? b) If you expect their yields to maturity to be 8% at the beginning of next year, what will their prices be then? What is your before-tax holding-period return on each bond? c) If your tax bracket is 30% on ordinary income and 20% on capital gains income, what will your after- ?tax rate of return be on each? d) Recalculate your answer to (b) under the assumption that you expect the yields to maturity ?on each bond to be 7% at the beginning of next year.
How much does Dynamo currently pay in interest, and how much will it have to pay after the restructuring in the prior problem, assuming that the cost of debt is constant?
Suppose you just receive a mortgage to buy your first house from ABH bank. Do you think you are going to contribute more to decrease of your unpaid balance at the end of each month in the early years of your payments.
after which growth should be at a constant rate of 6%. The last dividend paid was $1.00. What is the value Per share of your firm's stock?
Project A has an IRR of 15%. Project B has an IRR of 14%. Both projects have a required rate of return of 12%. Which of the following statements is most correct?
Suppose you are a potential buyer of the American call options on pounds sterling having a strike price of 1.460 and a maturity of next March are now quoted at 3.67. What does the available information mentioned above mean? Discuss in details.
Determine break-even point? If an organization's fixed costs increase, what happens to the break-even point? Explain how can the break-even point be lowered?
You work for ABC in finance department and own shares that are selling at $20 per share on the NYSE. There is a new stock offering that is going to be publicly declared.
Calculate the stock's value if it paid a $4 dividend last year, expects dividends to grow by 21 percent in years 1 & 2 and 10 percent dividend growth in year 3.
If the stock sells for $39 per share, what is your best estimate of the company's cost of equity?
Sharon Shay estimates that a college education has a $28,000 equivalent expense at graduation. She believes the benefits of her education will occur throughout 40 years of employment.
Jake's Bunker (Bob's Country Bunker), a chain of economically priced motels in the Midwestern United States has reviewed its current target structure of 40% debt and 60% equity.What is the cost of common equity? What is the WACC?
Wage Garnishers, Inc. has sales for the year of $50,300 and cost of goods sold of $23,700. The firm carries an average inventory of $4,800 and has an average accounts payable balance of $4,400. What is the inventory period?
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