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Assume Venture Healthcare sold bonds that have a ten-year maturity, a 12 percent coupon rate with annual payments, and a $1,000 par value.
a. Suppose that two years after the bonds were issued, the required interest rate rell to 7 percent. What would be the bonds' value?
b. Suppose that two year after the bonds were issued, the required interest rate rose to 13 percent. What would be the bonds's value?
c. What would be the value of the bonds three years after issue in each scenario above, assuming that interest rates stayed steady at either 7 percent or 13 percent?
What is the profitability index? What is the NPV?
Felton Farm Supplies, Inc. has an ROA (return on assets) of 12 percent, total assets of $300,000 and a net profit margin of 4.5 percent. What are Felton Farm Supplies annual sales?
A firm has a WACC of 10% and $50,000,000 in assets. They feel that that they can reduce their WACC to 9% by doing a better job of managing risk. How much should they be willing to pay for risk reduction?
You are now 30 years old and need $2,000,000 to fund your retirement at the age of 65. Each year you would like to save an amount that grows by 5% each year. Assume that the interest rate is 8% and the payments are made at the beginning of each year...
The Rogers Corporation has a gross profit of $702,000 and $277,000 in depreciation expense. Calculate the difference in cash flow between the two firms.
You have the chance to participate in a project that produces the following cash flows: The internal rate of return is 10%. If the opportunity cost of capital is 11%, what is the NPV of the project?
What problems might you encounter in marketing such a fund?
Micro Spinoffs, Inc., issued 20-year debt a year ago at par value with a coupon rate of 6%, paid annually. Today, the debt is selling at $1,130. If the firm’s tax bracket is 30%, what is its after-tax cost of debt?
Year Project A Project B 0 $ (43,500.00) $ (43,500.00) 1 $ 21,400.00 $ 6,400.00 2 $ 18,500.00 $ 14,700.00 3 $ 13,800.00 $ 22,800.00 4 $ 7,600.00 $ 25,200.00 1. Using the above cash flows, calculate the following for each project. Assume a 11% require..
Riskless asset and risky portfolio. Now suppose you require a risk premium of 15%. What is the price you will be willing today?
Use the expectations theory to calculate the current interest rates on two-year, three-year, and four-year Treasury notes.
Discuss the relationship between the interest rate differential between two countries and expected exchange rate using a real example.
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