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Use two decimal places in your answers. All problems are worth one point each except 6a is worth two points. A firm plans to issue $5,000,000 of commercial paper for 30 days. A dealer will issue the paper at $4,985,000 at a fee of $2,000 in advance. What is the effective annual rate? A firm has agreed to borrow $750,000 at a simple interest rate of 6% for 30 days to meet its short-term funding needs. The bank charges a loan processing fee of $1,000. What is the effective annual rate on this loan? Assume a trade creditor offers you terms of 2/10 net 40. What is the effective annual cost of forgoing the discount? If the firm=s bank charges 14% on loans, would you take the trade credit discount? A firm has established a revolving line of credit for $900,000 with a bank at a rate of prime plus 2%. There is an annual fee of 1/2% on any unused funds. Interest is discounted on loans. Prime was 5% when the agreement was made. Assume the firm decides to take down the line for $500,000 for 60 days when the prime is at 6%. What is the effective annual rate? A firm has $500,000 in accounts receivable. A commercial bank will accept these accounts receivable as collateral and will advance the firm 75% of the accounts receivable amount on loan at 6%. The bank charges a $5,000 credit checking fee. The firm will use the agreement for 90 days. What is the effective annual rate? A firm needs full use of $2,000,000 to purchase a new machine. A bank has agreed to loan at 9% discounted interest for 180 days. The bank requires a .25% compensating balance. The bank charges fees in advance of $300. How much will the firm need to borrow? What will be the effective annual rate on the loan? A firm has $900,000 in inventory qualifying for a short-term loan with a warehouse receipt. A commercial bank will accept this warehousing agreement and inventory as collateral and will advance 80% of the value of the inventory on loan at 6%. The bank charges $5,000 upfront for the agreement. The firm will use the borrowing for 60 days. What is the effective annual rate on the borrowing?
Trusts can be treated as separate tax entities or as conduits through which income is passed to the beneficiaries. An irrevocable trust has certain advantages not provided by a revocable trust. Which of the following is (are) advantages of the irrevo..
The Heuser company's currently outstanding bonds have a 7% coupon and 13% yield to maturity. Heuser believe it could issue new bonds at par that would provide a similar yield to maturity. If its marginal tax rate is 3.8%, what is Heuser's after tax c..
Consider the following information about three stocks: State of Probability of Rate of Return if State Occurs Economy State of Economy Stock A Stock B Stock C Boom 0.3 0.2 0.25 0.60 Normal 0.45 0.15 0.11 0.05 Bust 0.25 0.01 -0.15 -0.50 a. What are th..
Paccar’s current stock price is $48.20 and it is likely to pay a $0.80 dividend next year. Since analysts estimate Paccar will have an 8.8 percent growth rate, what is its required return?
Equation: x/y=a/b Out of the 10 natural numbers (1-10) if you draw 4 numbers at random what is the probability that the equation would be equal. (Example 2/2=3/3, 1/3=2/6 etc).
Case study operational risks and Financial Risk Management
Present value for various discounting periods-Find the present value of $800 due in the future under each of these conditions: 15% nominal rate, semi annual compounding, discounted back 10 years.
If asset A has a standard deviation of .2 and asset B has a standard deviation of .2, then any portfolio that involves positive investment in both asset A and asset B will also have a standard deviation of .2. For most firms, market value leverage is..
Sisters Corp expects to earn $8 per share next year. The firm’s ROE is 15% and its plowback ratio is 60%. If the firm’s market capitalization rate is 10%. Calculate the price with the constant dividend growth model.
You opened an account with an investment of $51,000. The value of the account quadrupled in 18 years. If interest was compounded quarterly, what rate per quarter did you earn on the account?
In a "perfect world" capital market, how important is a firm’s decision to pay dividends versus repurchase shares? Under what conditions would you have a tax preference for share repurchase rather than dividends?
mark golledge 65 years old is the major shareholder of news review ltd a 5 year old family run rapidly expanding
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