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In exchange for a $570 million fixed commitment line of credit, your firm has agreed to do the following: 1. Pay 1 percent per quarter on any funds actually borrowed. 2. Maintain a 3 percent compensating balance on any funds actually borrowed. 3. Pay an up-front commitment fee of .16 percent of the amount of the line. Based on this information, answer the following: a. Ignoring the commitment fee, what is the effective annual interest rate on this line of credit? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Effective annual interest rate 4.19 % b. Suppose your firm immediately uses $200 million of the line and pays it off in one year. What is the effective annual interest rate on this $200 million loan?
For the average business leader who is not in a finance role, how do risk, return, and the cost of capital impact him or her? How can you synthesize this into the workplace?
The derivative of the price function of the bond with respect to the yield to maturity is -$7,443.81 when evaluated at the current annual yield, which is 7%. Calculate the Macaulay duration D(.07, infinity) and the modified duration D(.07, 1) of t..
This exercise gives you an opportunity to discuss in class ethical and legal issues related to methods being used by many companies to spy on competing firms. Gathering and using information about competitors is an area of strategic management that J..
Define each of the following components of the return on equity model and discuss their interrelationships: a. ROE b. ROA c. EM d. ER e. AU
Abbott Laboratories (ABT) engages in the discovery, development, manufacture, and sale of a line of health care and pharmaceutical products. Below you will find selected information from Value Line. Use the Value Line estimated 2009 figures as the ac..
What is the profitability index for an investment with the following cash flows given a 14.5 percent required return? The cash flows, in order, are -$46,500 (initial cost), $12,200 (year 1 CF), $38,400 (year 2 CF), $11,300 (year 3 CF).
App Store Co. issued 17-year bonds one year ago at a coupon rate of 7.8 percent. The bonds make semiannual payments. If the YTM on these bonds is 5.5 percent, what is the current bond price?
A firm is evaluating the riskiness of two capital budgeting projects. The following table summarizes the NPV and associated probabilities for various outcomes of the two projects Net Present Value Probability Project A Project B 0.25 -$5,000 $0 0.50 ..
In general the greater a firms reliance upon short-term debt or current liabilites
At the end of the growth phase the following financial ratio becomes more important to analyze
Which of the following describes a portfolio that plots above the security market line? . A. The security is overvalued. B. The security is undervalued. C. The security is providing a return that is less than expected. D. The security’s beta is too h..
Caballos, Inc., has a debt to capital ratio of 41%, a beta of 1.97 and a pre-tax cost of debt of 5.8%. Estimate the Return on Capital.
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