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Jiminy's Cricket Farm issued a bond with 25 years to maturity and a semiannual coupon rate of 12 percent 3 years ago. The bond currently sells for 94 percent of its face value. The company's tax rate is 35 percent.
a. What is the pretax cost of debt?
b. What is the aftertax cost of debt?
c. Which is more relevant, the pretax or the aftertax cost of debt?
The Yurdone Corporation wants to set up a private cemetry business. According to the CFO, Barry M. Deep, business is "looking up". The company is somewhat unsure about the assumptions of a growth rate of 5.7 percent its cash flows. At what constant g..
Suppose the rate of return on a 10-year T-bond is 6.55%, the expected average rate of inflation over the next 10 years is 2.0%, the MRP on a 10-year T-bond is 0.9%, no MRP is required on a TIPS, and no liquidity premium is required on any Treasury se..
New regulatory requirement imposed on banks and financial institutions may have impacted a bank’s ability to generate mortgages for home buyers by increased requirements for disclosures, notices, statements, and documents related to lending. Evaluate..
You are constructing a portfolio of two assets, Asset A and Asset B. The expected returns of the assets are 14 percent and 17 percent, respectively. The standard deviations of the assets are 40 percent and 48 percent, respectively.
A bank has $1 million in vault cash, $5 million in short term Treasury securities and $20 million in deposits at a Federal Reserve Bank. Identify the term or concept that fits each description. The interest rate the Fed charges banks for short term l..
A stock price is $100 and can go up or down $10 in one month. The risk-free interest rate is 5% and no dividends are scheduled. What is your annualized expected return and risk if you invest in the stock? Is your answer consistent with portfolio theo..
The Company X. is currently considering a project that will produce cash inflows of $12,000 a year for three years followed by $6,500 in year four. The cost of the project is $38,000. What is the profitability index if the discount rate is 7 percent?
Kyle Corporation is comparing two different capital structures, an all-equity plan (Plan I) and a levered plan (Plan II). Under Plan I, Kyle would have 705,000 shares of stock outstanding. Under Plan II, there would be 455,000 shares of stock outstan..
1. what is a strategic alliance?2. do most strategic alliances succeed?3. what forms can strategic alliances take?4.
In 2005, selected automobiles had an average cost of $18,000. The average cost of those same automobiles in now $21,960. What was the rate of increase for these automobiles between the two time periods?
By approximately how much more would the present value of annuity be for $4000/year annual payments for the next 5 year with an interest rate 10% APR compounded semi-annually if the cash flows were annuity due instead of ordinary annuity and interest..
Winston Electronics reported the following information at its annual meetings. The company had cash and marketable securities worth $1,235,540, accounts payables worth $4,160,490, inventory of $7,121,930, accounts receivables of $3,488,740, notes pay..
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