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Your cost of capital is 0.75% per month. If a car dealer offers you either a 5-year car lease with payments of $500/month (60 payments in total at the end of each month) or a 4-year car lease with an upfront payment of $2000 and subsequent payment of $400/month (48 payments at the end of each month), and if you do consider a 4-year car to be the same as a 5-year old car, then which one should you take? (Assume that your need for a car continues after the expiry of each contract. Thus, you will consider again to choose between two options)
Hint) Comparison of the ‘effective’ monthly payment of the two. The first one has a monthly payment of 500. What is the effective monthly payment of the second?
The company’s tax rate is 35%. 21. Calculate the company’s market value debt to equity ratio.
In each subsequent year, you expect the value of your portfolio to double with probability p = 0.45 or to decrease by half with p = 0.55.
Caughlin Company needs to raise $70 million to start a new project and will raise the money by selling new bonds. The company will generate no internal equity for the foreseeable future. What is the true initial cost figure the company should use whe..
Douglass Trucking issued 120,000 shares of stock last week. The underwriters charged an 8.5 percent spread in exchange for agreeing to a firm commitment. The legal and accounting fees amounted to $395,000. What was the flotation cost as a percentage ..
Which of the following would not usually be a section of a business plan? The time period covered by a business plan is often called the: Strategic planning involves broad thinking about a firm's mission, and goals. It usually has a time frame or pla..
Given the efficient markets belief that stock prices respond to news, explain this apparently contradictory price change.
Today, interest rates on 1-year T-bonds yield 1.4%, interest rates on 2-year T-bonds yield 2.1%, and interest rates on 3-year T-bonds yield 3.5%. a. If the pure expectations theory is correct, what is the yield on 1-year T-bonds one year from now? Be..
Suppose that it is financed by a combination of common stock and $1.18 million of debt. The interest rate on the debt is 9%, and the corporate tax rate is 40%. How much profit is available for common stockholders after payment of interest and corpora..
Suppose that a bond is trading at a price of $940. What is the coupon rate for this bond?
Do you also have the answers for the quizzes and tests that go along with my textbook? Why do fixed-income instruments change their price when there are changes in interest rates? Higher net benefits or higher ratio is better? why?
Firms may prefer to issue cumulative preferred stock rather than debt for which reason?
Which of the following was NOT one of Britain's difficulties during the American Revolution?
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