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OU Energy Company is trying to manage the risk associated with crude oil prices. The current spot price for crude oil is $100. After evaluating what OU believes will happen with crude oil prices, they enter into a Forward contract with Samantha Oil. The terms of the Forward are that OU has agreed to buy 10,000 barrels of oil one year from today from Samantha Oil. The current cost of storing oil like this is $1.50 per barrel per quarter - payable at the beginning of each quarter. The current risk - free interest rate is 3%
What is the correct forward price for this deal?
The Faraway Moving Company is involved in major plant expansion that involves expenditure of ?$196 million in coming year. flotation cost adjusted initial outla
How will Gabella's debt issue affect Terry's annual dividend income?
The following items are components of a traditional balance sheet. How much are the total assets of the firm?
Discuss the importance of diversification in investment decisions. List four important common stock characteristics.
The spot exchange rate is 1.57 dollars per pound. The 30-day forward exchange rate is .6211 pounds per dollar. Therefore, pounds in the forward market are selling at a ________ to the current spot rate.
You are looking at an investment that has an effective annual rate of 14.2 percent. What is the effective monthly return? Here we need to convert an EAR into interest rates for different compounding periods. Using the equation for the EAR, we get: No..
A grader costs $350,000 to purchase and is expected to have a useful life of 8 years. Annual operating and maintenance costs are estimated to be $35,000 per year, and the salvage value after 8 years of use is estimated to be $50,000. At an interest r..
Calculate the NPV and IRR of this investment under each of the four terminal value assumptions
You are making a $35,000 investment and feel that a 10.6 percent rate of return is reasonable given the nature of the risks involved. You feel you will receive at least $8,000 in the first year, $27,000 in the second year, $32,000 in the third year, ..
A stock is trading at $60 per share. The stock is expected to have a year-end dividend of $3 per share (D1 = $3), and it is expected to grow at some constant rate g throughout time. The stock's required rate of return is 16% (assume the market is in ..
a project has an initial cost of 40000 expected net cash inflows of 9000 per year for 7 years and a cost of capital of
Naggpawh fabrics has issued a 30 year par value bond that is callable in 5 years. If the coupon rate is 5.5% payable semi-annually, what is this bond’s yield to call if the yield to maturity is 8% and the call premium is one year’s interest (55 dolla..
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