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Consider the same two firms U and L - that are identical except for capital structure. Each firm expects EBIT of $650,000 each year forever. Firm U has a cost of equity of 10% and Firm L has $2 million in perpetual debt with a coupon rate of 7%. There is no chance of bankruptcy, but earnings of each are taxed at a rate of 45%. What is the value of firm U?
What are some financial structure risks and indicators when foreign companies are thinking of investing in South Africa.
Use your finding in part a to discuss the effect of more frequent deposits and compounding of interest on the future value of an annuity.
Becker Financial recently declared a 2-for-1 stock split. Prior to the split, the stock sold for $80 per share. If the firm's total market value is unchanged by the split, what will the stock price be following the split?
Deere & Company exports tractors to Spain, but the strong dollar against the Euro hurts sales of Deere Tractors in Spain. In the Spanish market
Discuss a type of bond that interests you and how it is differentiated from other bonds. Then explain how interest rates affect their value.
Suppose you postpone consumption and invest at 9% when inflation is 3%. What is the approximate real rate of your reward for saving?
Do you think that loss adjustment would be most difficult in the field of life insurance, property insurance, or liability insurance?
What is the net cash flow of this arbitrage strategy at the option expiration date, assuming that Stock XLT trades at $23 at expiration three months from now?
. A buyer has recently approached you and wants an option to buy the land in the next 12 months for $1.4 million. The risk-free rate of interest is 5 percent per year, compounded continuously. How much should you charge for the option?
Marie owns shares of Deltona Productions preferred stock which she says provides her with a constant 14.3 percent rate of return. The stock is currently priced at $45.45 a share. What is the amount of the dividend per share?
A non-dividend paying stock is currently trading at $100 and its volatility is 40%. Consider a put option on this stock, with a strike price of $110, expiring in 1.5 years. The current risk-free rate is 2% per annum. We will price the put option with..
Suppose that the owner of the flower shop is willing to negotiate on price. What is the minimum price per box Wagner should charge?
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