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Assume a bank loan requires an interest payment of $85 per year and a principal payment of $1,000 at the end of the loan's eight-year life.
a. At what amount could this loan be sold for to another bank if loans of similar quality carried an 8.5 percent interest rate? That is, what would be the present value (PV) of this loan?
b. Now, if interest rates on other similar quality loans are 10 percent, what would be the PV of this loan?
c. What would be the PV of the loan if the interest rate is 8 percent on similar quality loans?
Tobin's Barbeque has a bank loan at 8% interest and an after-tax cost of debt of 6%. What will the after-tax cost of debt be when the loan is due if a new loan is taken out yielding 11%.
An alternative approach to hedging risk is to focus instead of diversify. In this approach, which is just the opposite of diversifying, you would only invest in one thing.
Determine the maximum deductible contribution
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Diversification is assumed to reduce risks. Describe diversification mean in the context of corporate finance, and how does it reduce risks in that context?
Corporations must identify its capital needs prior to assessing appropriate capital structure. The next step is for the firm to undertake all considerations in finishing necessary analysis to ensure its capital structure is suitable.
Assume that you just won the state lottery. Your prize can be taken either in form of $40,000 at the end of each of the next 25 years (i.e., $1 million over 25 years) or as a lump sum of $500,000 paid immediately.
A equipment originally had an estimated useful life of 5 years, but after 3 complete years, it was decided that the original estimate of useful life should have been ten years.
Describe about investments and stock returns are independent-one stock in increasing in price has no effect on the prices of the other stocks
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