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Suppose your company needs to raise $10 million to construct a new office building at an expanded manufacturing site. As CFO, you plan to raise the money by selling 30-year $1,000 par value bonds with a coupon rate of 6% which is the Yield in Maturity on your firm’s outstanding bonds. Between the time that your bond agreement is finalized and the bonds are sold to investors, inflation spikes and adds 2% to the required return on your bonds. a. Prior to the rate increase, how many bonds would your company need to issue to fund the capital investment under consideration? b. After the rate increase, how many bonds would your firm need to issue to fund the capital investment under consideration? c. Suppose your firm could issue 10-year bonds instead of the 30-year bonds. How many of the 10-year bonds would your firm need to sell?
The top two strategies that contributed to the success of Apple unseating Windows are Microsoft’s stumbles with Vista, and Windows 8.0 and Apple fostering the perception of high quality hardware and software. How did these two strategies help Apple u..
A project has an initial cost of $925, expected net cash inflows of $690.30 per year for 4 years, and a cost of capital of 11.10%. What is the project's discounted payback period?
Essary Enterprises has bonds on the market making annual payments, with eight years to maturity, a par value of $1,000, and selling for $952. At this price, the bonds yield 6.1 percent. What must the coupon rate be on the bonds?
An asset used in a four-year project falls in the five-year MACRS class (MACRS Table) for tax purposes. The asset has an acquisition cost of $8,500,000 and will be sold for $1,890,000 at the end of the project. If the tax rate is 30 percent, what is ..
Which of these money market instruments are short-term funds transferred between financial institutions, usually for no more than one day?
Calculate and explain WACC. Use the target capital structure of 15% debt, 2% preferred stock, and 83% common equity. What impact do the weights have on the WACC calculation?
(Relative valuation of common stock). Using P/E ratio approach to valuation calculate the value of a share of stock under the following conditions. The stock price using the P/E ratio valuation method is. The stock price using the dividends discount ..
Paltron Company made an investment in another that guarantees cash flow $ 22,500 each year for the next 5 years. If the company uses a discount rate of 15% on their investments, what is the present value of this investment?
Mark Goldsmith’s broker has shown him two bonds. Each has a maturity of 5 years, a par value of $1,000, and a yield to maturity of 12%. Bond A has a coupon interest rate of 6% paid annually. Bond B has a coupon interest rate of 14% paid annually. Cal..
What would be the WACC given the following: all debt will be from the sale of bonds with a coupon of 10% (assume no flotation costs), preferred stock's associated cost will be 13%, and common equity will be from retained earnings with an associated c..
Camila plans to go for vacation to Australia in 7 years from now. She estimates that she will need $15,668 for the trip. How much does she need to place in a saving account today that earns 4.83 percent per year (compounded quarterly) to accumulate t..
Calculate the Present Value of Annuity of receiving $5,000 each year for the next 12 years with interest rate of 7%. 8 Calculate the Future Value of Annuity of investing $6,000 each year starting now for 10 years at 5% interest rate. 9 How much would..
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