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Jiminy's Cricket Farm issued a 30-year, 7.4 percent semiannual bond 9 years ago. The bond currently sells for 93 percent of its face value. The company’s tax rate is 30 percent. a. What is the pretax cost of debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Pretax cost of debt % b. What is the aftertax cost of debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Aftertax cost of debt % c. Which is more relevant, the pretax or the aftertax cost of debt?
Joe's Legal Services is raising capital to open a new law office in northern Illinois. The project has an initial start up cost of $1,448,289. The firm maintains a debt-equity ratio of 0.50 and has a flotation cost of debt of 6.8 percent and a flotat..
Suppose you are a U.S. investor who is planning to invest $965,000 in Mexico. Your Mexican investment gains 11.8 percent. If the exchange rate moves from 14.0 pesos per dollar to 14.3 pesos per dollar over the period, what is your total return on thi..
Assume both portfolios A and B are well diversified, that E(rA) = 12.0% and E(rB) = 13.1%. If the economy has only one factor, and βA = 1 while βB = 1.2, What must be the risk-free rate?
Assume all rates are annualized with semi-annual compounding. What is the dollar duration of the forward contract? What is the no arbitrage forward price?
Retro Machine, Inc., follow. Interest expense will remain constant; the tax rate and the dividend payout rate will also remain constant.
Assume the annual average return on the S&P500 is 13.7% with a standard deviation of 17.5%. A risk-free asset has an annual average return of 4.0% with a standard deviation of 0.0% and a correlation with the S&P500 index of +0.00. An investor invests..
Whatever the firm does not reinvest into the business it pays as dividends to shareholders. Calculate the forward P/E for the firm.
XYZ Co. has purchased 100.000 Canadian dollar put options for speculative purposes. Each option was purchased for a premium of $.03 per unit, with an exercise price of $.90 per unit. XYZ Co. will exercise the options (if it is feasible to exercise th..
You are a portfolio manager who has just discovered the possibilities of stock-index futures. Assume that you have the resources to buy and hold the stocks in the S&P 500. Any day between February 24 and March 1, obtain the current level of the S&P 5..
The Faraway Moving Company is involved in a major plant expansion that involves the expenditure of ?$219 million in the coming year.
Current assets management involves the management of cash, marketable securities, accounts receivable and inventory.
Suppose you can only use the spot market. What is your total dollar cost? (choose either the bid or ask and make the conversion based on 1 million pounds) If you are able to buy in both spot and forward markets, where is it cheaper to buy pounds? Wha..
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