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You are considering adding a new software title to those published by your highly successful software company. If you add the new product, it will use capacity on your disk duplicating machines that you had planned on using for your flagship product, “Battlin’ Bobby.” You had planned on using the unused capacity to start selling “BB” on the west coast in two years. You would eventually have had to purchase additional duplicating machines 10 years from today, but using the capacity for your new product will require moving this purchase up to two years from today. If the new machines will cost $100,000 and will be depreciated straight-line over a five-year period to a zero salvage value, your marginal tax rate is 32 percent, and your cost of capital is 12 percent, what is the opportunity cost associated with using the unused capacity for the new product?
(Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places.)
Suppose bond A has 20 years left to maturity, an 8% coupon rate, pays interest semi-annually, and has a 6% yield to maturity and bond B has 25 years left to maturity, a 5% coupon rate, pays interest semi-annually, and has a 7% yield to maturity. What..
what is the most you are willing to pay in points for the 5.75% mortgage? Assume a $100,000 mortgage.
A bond with an 11% coupon is issued at its face value of $1,000. What will the bond's value be if the required return of bond investors immediately increased to 14% if the bond had an original maturity of 1 year? 20 years? Bond financing is best char..
The rate of return on Cherry Jalopies, Inc., stock over the last five years was 19 percent, 11 percent, -7 percent, 6 percent, and 9 percent. Over the same period, the return on Straw Construction Company’s stock was 16 percent, 20 percent, -3 percen..
Assume an economy in which there are three securities: Stock A with rA = 10% and σA = 10%; Stock B with rB = 15% and σB = 20%; and a riskless asset with rRF = 7%. Stocks A and B are perfectly negativly correlated (rAB = -1). The expected return on th..
What is the Macaulay duration of a 7 percent coupon bond with five years to maturity and a current price of $1,025.30? What is the modified duration? Use duration to estimate the new price of the bond. Compare your answer to the new bond price calcul..
What is Gretchen's dollar-weighted rate of return?
A bond has duration of 5.5 years. Its current market price is $980. Interest rates in the market are 4 percent today. It has been forecasted that interest rate will rise to 5 percent over the next couple of weeks. How will the bond's price change in ..
A Treasury bond that matures in 10 years has a yield of 4.75%. A 10-year corporate bond has a yield of 10%. Assume that the liquidity premium on the corporate bond is 0.3%. What is the default risk premium on the corporate bond?
Five years old Cheyenne stark was riding in the backseat of her parents ford tarus. Cheyenne was not sitting in a booster seat. Instead, she was using a seatbelt designed by ford ,but was wearing the shoulder belt behind her back. The car was involve..
The standard deviation on small company stocks:
You have just made your first $5,000 contribution to your individual retirement account. Assuming you earn a 10.1 percent rate of return and make no additional contributions, what will your account be worth when you retire in 45 years? What if you wa..
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