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International Tile Importers, Inc., is a rapidly growing firm that imports and markets floor tiles from around the world that are used in the construction of custom homes and commercial buildings. The firm has grown so fast that its management is considering the issuance of a five-year interest-only note. The notes would have a principal amount of $1,000 and pay 12% interest each year, with the principal amount due at the end of Year 5. The firm's investment banker has agreed to help the firm place the notes and has estimated that they can be sold for $800 each under today's market conditions. a) What is the promised yield to maturity based on the terms suggested by the investment banker? b) The firm's management looked at the yield to maturity estimated above with dismay, for it was much higher than the 12% coupon rate, which is much higher than current yields on investment-grade debt. The investment banker explained that for a small firm such as International Tile, the bond rating would probably be in the middle of the speculative grades, which requires a much higher yield to attract investors. It even suggested that the firm recalculate the expected yield to maturity on the debt under the following assumptions: The risk of default in Years 1 through 5 is 5% per year, and the recovery rate in the event of default is only 50%. What is the expected yield to maturity under these conditions? Use tab 4-5
bobs granddaughter was born today. bob wants to be able to give his granddaughter 200 a month from her 18th birthday
which is an advantage of corporations relative to partnerships and sole proprietorships?a lower taxes.b harder to
Ryngaert Inc. recently issued noncallable bonds that mature in 15 years. They have a par value of $1,000 and an annual coupon of 5.7%. If the current market interest rate is 6.8%, at what price should the bonds sell?
You will begin payments one year from today. You will make your last deposit when your oldest child enters college. Also assume that each child will take 4 years to graduate from college.
financial decisions often place heavier emphasis on one type of financial statement over the others. consider each of
Explain how the health care industry's share of GDP affects the entire economy?
A corporation produces two products: Product A and B. Each product must go through two processes. Each Product A produced requires 2 hours in Process 1 and five hours in Process two.
A bank offers two 30 year, fixed rate, fully amortizing LPMs: an 85% LTV loan at 6%, and an 80% LTV loan at 5.5%. What is the marginal cost of borrowing if the loan is going to be held for 10 years?
Why is working capital management important to a company? Are there particular industries where managing working capital is more important?
Melissa Gould wants to invest today in order to assure adequate funds for her son's college education. She estimates that her son will need $20,000 at the end of 18 years;
The additional educational years or the time value of money.
Besides investment banking relationship , list at least three other sources of potential conflicts that can compromise an analyst's independence.
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