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A Treasury bond that matures in 10 years has a yield of 4.58%. A 10-year corporate bond has a yield of 6.63%. Assume that the liquidity premium on the corporate bond is 0.51%. What is the default risk premium on the corporate bond? State you answer as a percentage to 2 decimal places.
If the exchange rate value of the euro goes from U.S. $1.15 to U.S. $1.05, then:
Project K costs $52125 today. Its expected cash inflows are $12000/year for 8 years. With a WACC of 14%, what is the project’s NPV, IRR, MIRR, payback, and discounted payback?
Suppose that you have a bond that is currently trading for 1,234.56, has a time-to-maturity of 14 years, pays semi-annual coupon payments of $35.50, and a face value of $1,000. Also, suppose that the bond was purchased 90 days after its last, semi-an..
"Time Value of Money and Bond Valuation" Please respond to the following: Examine the concept of time value of money in relation to corporate managers. Propose two (2) methods in which time value of money can help corporate managers in general.
The statement of cash flows is the last of the four financial statements we discussed. Explain why this statement is important to investors and how it complements the income statement and balance sheet. You should be able to answer this question in s..
An incentive program that encourages new ideas, whether for new products or better processes, is a good way to generate capital investment proposals. Capital expenditures are long term & expensive. A post audit is an important step in the capital bud..
The board members of Felicia & Fred are strategically evaluating the prospects of fulfilling increasing demand for its products and reaching new consumers. You have recently evaluated the expansion of manufacturing facilities for Felicia & Fred, enta..
Distinguish between beta (i.e market) risk, within-firm ( i.e,corporate) risk, and stand-alone risk for a potential project. Of the three measures, which is theoretically the most relevant, and why? Suppose a firm estimates its overall cost of capita..
Project A: 15,000 investment. Bank loan, 9% interest rate annual, monthly payments. Project B: 2,000 cash investment, plus 150 delivery, 650 installation. No required rate of return given, no equity. Cost of debt after tax 8%
Barbara is considering investing in a stock and is aware that the return on that investment is particularly sensitive to how the economy is performing. Her analysis suggests that four states of the economy can affect the return on the investment. Usi..
Break-even Financing. Lakeland, Inc., is a U.S.-based MNC with a subsidiary in Mexico. Its Mexican subsidiary needs a one-year loan of 10 million pesos for operating expenses. Since the Mexican interest rate is 70 percent, Lakeland is considering b..
The covariance of the returns between Willow Stock and Sky Diamond 0.0950. The variance of Willow is 0.2330 and the variance of Sky Diamond is 0.1240. What is the correlation coefficient between the returns of the two stocks?
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