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Dr. Ruth is going to borrow $6,100 to help write a book. The loan is for one year and the money can either be borrowed at the prime rate or the LIBOR rate. Assume the prime rate is 11 percent and LIBOR 2.5 percent less. Also assume there will be a $47 transaction fee with LIBOR (this amount must be added to the interest cost with LIBOR).
a. What is the effective interest rate on the LIBOR loan? (Use a 360-day year. Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)
American Airlines hedges a £2.5 million receivable by selling pounds forward. If the spot rate is £1 = $1.73 and the 90 day forward rate is $1.7158, what is American's cost of hedging? $142,000 $35,500 $8,875 it is unknown at the time American enters..
Upper Gullies Corp. just paid a dividend of $2.10 per share. The dividends are expected to grow at 21 percent for the next eight years and then level off to a growth rate of 7 percent indefinitely. If the required return is 14 percent, what is the pr..
We are evaluating a project that costs $1,180,000, has a ten-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 66,000 units per year. Calculate the best-case an..
A project is expected to create operating cash flows of $30,000 a year for three years. The initial cost of the fixed assets is $62,000. These assets will be worthless at the end of the project. An additional $5,000 of net working capital will be req..
One year ago, JK Mfg. deposited $20,500 in an investment account for the purpose of buying new equipment four years from today. Today, it is adding another $15,000 to this account. The company plans on making a final deposit of $10,000 to the account..
A house painting business had revenues of $17,000 and expenses of $10,000 last summer. There were no depreciation expenses. However, the business reported the following changes in working capital: Calculate net cash flow for the business for this per..
UVA Co. is a U.S.-based MNC that obtains 40 percent of its foreign supplies from Thailand. It also borrows Thailand’s currency (the baht) from Thai banks and converts the baht to dollars to support U.S. operations. Explain how UVA Co. can reduce its ..
CC Corp. has a ratio of total debt to total assets of 0.45 and a current ratio of 1.25. CC (7%) Corp.’s current liabilities are $800, sales are $7,000, and total equity is $2,750. Compute and interpret precisely CC Corp.’s fixed asset turnover ratio.
Dunbar Corporation has $1000 face value bonds on the market with 12years to maturity, a YTM of 8%, and a current price of $1,226.08. The bonds make annual payments. What must the coupon rate be on Dunbars bonds?
A stock has an expected return of 6%. What is its beta? Assume the risk-free rate is 5% and the expected rate of return on the market is 10%. (Negative value should be indicated by a minus sign. Round your answer to 2 decimal places.)
It takes an average of one day for the funds from these checks to be added to the firm's available balance at the bank once they have been deposited. What is the amount of the average daily float? Assume a 30-day month.
Discuss the role of the credit Ratings Agencies. In what way did the Rating Agencies contribute to the financial crisis of 2008?
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