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1. Change in Interest Rates. Briefly discuss conditions that can cause a shift in the demand for funds and a change in the interest rate.
2. Impact of Economy on Risk Premium. Explain why a weak economy may cause the risk premium to rise.
3. Risk Premiums Required by Investors. Why is a high risk premium an advantage for the investor? Why is a low risk premium an advantage for an investor?
Thornley Machines is considering a 3-year project with an initial cost of $720,000. The project will not directly produce any sales but will reduce operating costs by $410,000 a year. The equipment is depreciated straight-line to a zero book value ov..
Safelife insurance company has $85 million in assets, $80 million in liabilities, and $5million in shareholders' equity. The duration of liabilities is 3. If Safelife wants to immunize its net worth against interest rate risk (i.e. set the duration o..
Raylan Givens borrows $150,000 to buy a house. The adjustable rate mortgage carries a 1.5 percent rate for the first 3 years. After that the rate will change annually to reflect market conditions. The annual cap is 2% (i.e., the largest increase in a..
Compute Koda's weighted average cost of capital WACC and compute the future cash flows associated with the manufacturing of mobility vehicles and the net present value (NPV) of the project by filling in the blanks in the table below. Advise whether..
the 2010 balance sheet of marias tennis shop inc. showed long-term debt of 3.1 million and the 2011 balance sheet
Commercial paper offers which of the following advantages to the issuer? A "normal" term structure of interest rates would depict. Money markets include which of the following securities? In break-even analysis, the contribution margin is defined as...
"Atlantic Airlines Case Atlantic Airlines issued $100 million in bonds in 2008. Because of the firm's low credit rating (B3), the bonds were considered junk bonds. At the time of the issue, the 20 year bonds were paying a yield of 12 percent. If the ..
Cisco, an IT company, has announced a plan to invest in a new factory, and on the same day, the company's stock price jumped up by 1%. Describe a situation where this increase of the stock price may be interpreted as indicating that investors view th..
An investment offers $10,400 per year for 13 years, with the first payment occurring 1 year from now. Assume the required return is 12 percent.What is the value of the investment today? What would the value be if the payments occurred for 38 years?
Assume that the Provident Health System, a for-profit hospital, has $1 million in taxable income for 2008, and its tax rate is 30 percent. A. Given this information, what is the firm’s net income? B. Suppose that the hospital pays out $300,000 in div..
Portfolio analysis You have been given the expected return data shown in the first table on three assets-F, G, and H- over the period 2013-2016. Expected return Asset F 2016 16%, 2017 17% 2018 18% 2019 19%- Asset G 2016 17% 2017 16% 2018 15% 2019 14%..
TeleStark is considering building a new manufacturing plant. This plant will cost $9 million to build. The new plant will produce cash inflows of $2.05 million per year for the next 7 years. TeleStark already owns the land on which it intends to buil..
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