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A company's 5-year bonds are yielding 7.9% per year. Treasury bonds with the same maturity are yielding 5.8% per year, and the real risk-free rate (r*) is 2%. The average inflation premium is 3.4%, and the maturity risk premium is estimated to be 0.1(t - 1)%, where t = number of years to maturity. If the liquidity premium is 1.05%, what is the default risk premium on the corporate bonds? Round your answer to two decimal places.
What is the equivalent annual annuity of the project’s costs, if the company’s weighted average cost of capital is 9.4% per year?
The present value of an increasing perpetuity due with quaterly payments $100, $200, $300, etc. is three times the present value of a perpetuity immediate with level quaerly payments $500. If both perpetuities use the same annual effective interest r..
how much net cash flow would be generated?
Marian Plunket owns her own business and is considering an investment. What is the NPV of this opportunity if the interest rate is 2 % per? year?
We are evaluating a project that costs $901,000, has an seven-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 101,000 units per year. The projections given fo..
Air Jet Best Parts, Inc. would like issue 20- years’ bonds to obtain remaining funds for the New Mexico plan. The company currently has 7.5% semiannually coupon bonds in the market that sell for $1,062 and mature in 20 years. What coupon rate should ..
The process of estimating cash flows for capital budgeting projects is very subjective and relies upon the discretion of those involved.
What does Bill believe the inflation rate will be over the next year?
What percentage of the firm's assets does the firm finance using debt (liabilities)? b. If Campbell were to purchase a new warehouse for $ 1.1 million and finance it entirely with long-term debt, what would be the firm's new debt ratio? What percenta..
Medwig Corporation has a DSO of 42 days. The company averages $4,500 in credit sales each day. What is the company's average accounts receivable? Round your answer to the nearest dollar.
Explain. High beta stocks are always more volatile than low beta stocks.
Determine for which transaction it would have been most important for Portofit no to hedge its foreign exchange risk.
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