Pet Food Company bonds pay a annual coupon rate of 14.35 percent. Coupon payments are paid semiannually. Bonds have 23 years to maturity and a par value of $1000. Compute the value of Pet Food Company bonds if the market interest rate on this type of bond is 10.31 percent.
16 Aug 2021National Business Machine Co. (NBM) has $9 million of extra cash after taxes have been paid. NBM has two choices to make use of this cash. One alternative is to invest the cash in financial assets. The resulting investment income will be paid out as a special dividend at the end ...
16 Aug 2021Does Arbitrage Destabilize Foreign Exchange Markets? Why?
16 Aug 2021Googooâs most recent dividend was $2.0 per share (D0 = $2.0). The dividend is expected to grow at a rate of 8 percent per year. The risk-free rate is 5 percent and the return on the market is 12 percent. If the companyâs beta is 1.2, what is the price of the stock today?
16 Aug 2021What is an IRA? Is it important for an individual to have an IRA? Why or why not?
16 Aug 2021There is a 4.6 percent coupon bond with five years to maturity and a current price of $1,046.00. What is the dollar value of an 01 for the bond? Round your answer to 3 decimal places.
16 Aug 2021Consider the following spot interest rates for maturities of one, two, three, and four years.r1 = 4.3% r2 = 4.9% r3 = 5.6% r4 = 6.4%Assuming a constant real interest rate of 2 percent, what are the approximate expected inflation rates for the next four years?Use the Fisher hypoth...
16 Aug 2021Parr Papers stock has a beta of 1.45, and its required return is 12.50%. Clover Dairys stock has a beta of 0.80. If the risk-free rate is 3.50%, what is the required rate of return on Clovers stock? (Hint: First find the market risk premium.)
16 Aug 2021A 7-year annuity of fourteen $12,200 semiannual payments will begin 9 years from now, with the first payment coming 9.5 years from now. If the discount rate is 13 percent compounded monthly, what is the value of this annuity five years from now? (Do not round intermediate calcula...
16 Aug 2021How would each of the following affect a firmâs cost of debt, rd(1 T); its cost of equity, rs; and its WACC? Indicate by a plus (), a minus (), or a zero (0) if the factor would raise, lower, or have an indeterminate effect on the item in question. Assume for each answer that o...
16 Aug 2021It is time to buy a used Toyota Camry. You got a loan for 10 years. The car cost you $12,000. It is not a new car, but in a very decent shape. The bank expects you to pay $150 a month. Calculate the EAR.
16 Aug 2021After negotiations, you purchased a 20-year investment that pays you $100 at the end of year one, $500 at the end of year 2, and $750 at the end of year 3. Additionally, the investment pays you some fixed cash flow, letâs call it âXâ, at the end of each of the remaining se...
16 Aug 20212) A great opportunity came up. You have a chance to get an investment that pays $500 at the end of every six months for the next three years. APR is 12%. Here is the trick, interest is compounded quarterly. Find the PV of the investment.
16 Aug 2021Cashew Corporation has a five-year bond whose yield to maturity is 6.5%. The bond has no coupon payments. What is the price of this zero coupon bond? (Assume semi-annual compounding)
16 Aug 2021For $15,000, you can buy an annuity contract that pays $2,352 at the end of each of the next 9 years. What is the annual interest rate on this annuity?
16 Aug 2021Mega United just paid a dividend of $1.00 per share. Analysts expect its dividend to grow at 17% per year for the next two years and then 2% per year thereafter. If the required rate of return in the stock is 14%, calculate the current value of the stock.
16 Aug 2021Problem 6-47 Present Value and Multiple Cash Flows [LO1] What is the value today of $4,800 per year, at a discount rate of 8 percent, if the first payment is received 7 years from today and the last payment is received 25 years from today? (Do not round intermediate calculations ...
16 Aug 2021After retirement, Mr. X expects to live another 25 years. If he requires $100,000 at the end of each year and interest rates are 7%, how much will he need to have accumulated on the day that he retires?
16 Aug 2021Explain the options a company has to convert its receivables to cash.
16 Aug 2021Calculating Annuity Present ValueLO1] An investment offers $5,500 per year for 15 years, with the first payment occurring one year from now. If the required return is 6 percent, what is the value of the investment? What would the value be if the payments occurred for 40 years? Fo...
16 Aug 2021General Mills has a $1,000 par value, 24-year to maturity bond outstanding with an annual coupon rate of 9.99 percent per year, paid semiannually. Market interest rates on similar bonds are 8.20 percent. Calculate the bondâs price today.
16 Aug 2021The stock of Big Joes has a beta of 1.64 and an expected return of 13.30 percent. The risk-free rate of return is 5.8 percent. What is the expected return on the market? 3.79 percent 17.01 percent 8.73 percent 7.50 percent 10.37 percent
16 Aug 2021If the economy booms, RTF, Inc. stock is expected to return 11 percent. If the economy goes into a recessionary period, then RTF is expected to only return 2 percent. The probability of a boom is 74 percent while the probability of a recession is 26 percent. What is the variance ...
16 Aug 2021Suppose you have listed Le Napoleons monthly sales of pear tortes in a twelve-sheet workbook. The first worksheet contains January sales, the second worksheet February sales, etc. The pear torte sales are always listed in cell F7. What multi-sheet (three-dimensional) formula woul...
16 Aug 2021Benjamin Manufacturing has a target debt-equity ratio of .65. Its cost of equity is 14 percent, and its cost of debt is 9 percent. Required: If the tax rate is 35 percent, what is the companyâs WACC?
16 Aug 2021Jensens Travel Agency has 11 percent preferred stock outstanding that is currently selling for $57 a share. The market rate of return is 13 percent and the firms tax rate is 34 percent. What is Jensens cost of preferred stock? 6.56 percent 16.40 percent 7.26 percent 19.30 percent...
16 Aug 2021The expected return on HiLo stock is 14.85 percent while the expected return on the market is 13.9 percent. The beta of HiLo is 1.29. What is the risk-free rate of return? 0.95 percent 2.36 percent 5.31 percent 11.91 percent 10.62 percent
16 Aug 2021Wilson Pharmaceuticalsâ stock has done very well in the market during the last three years. It has risen from $65 to $90 per share. The firmâs current statement of stockholdersâ equity is as follows:Common stock (2 million shares issued at par value of $10 per share)20,000...
16 Aug 2021Find the after-tax return to a corporation that buys a share of preferred stock at $36,sells it at year-end at $36, and receives a $6 year-end dividend. The firm is in the 30% tax bracket.
16 Aug 2021Aardvark, Inc. pays a constant annual dividend. At the end of trading on Wednesday, the price of its stock was $28. At the end of trading on the following day, the stock price was $27. As a result of the decline in the stocks price, the dividend yield _____ while the capital gain...
16 Aug 2021A) You decide to purchase a home that costs $140,000. If you make a down payment of $20,000 and borrow the rest at a 4.25% 30-year mortgage, calculate your monthly payment.B) Now recalculate the monthly payment if you had to borrow at 9.5% instead of 4.25%.C) Assume that you plan...
16 Aug 2021Assume that there is a bond that pays $50 at the end of year 1 and $50 at the end of year 2. It sells at $100. The Macauley duration of the bond is:A) 0B) 1C) 1.5D) 2
16 Aug 2021Assume that you manage a bond portfolio. The dollar duration of the portfolio is -6710000. An instrument is traded with dollar duration equal to -1342. To make the portfolio duration neutral you need to:A) Buy 1342 units of the hedging instrumentB) Short sell 5000 units of the he...
16 Aug 2021Discuss how the desire for control may influence a firms willingness to pay dividends. In addition, please explain the relationship between a companys growth possibilities and its dividend policy.
16 Aug 2021Down Under Boomerang, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2.49 million. The fixed asset falls into the three-year MACRS class. The project is estimated to generate $2,010,000 in annual sales, with costs of $7...
16 Aug 2021It will cost $3,300 to acquire a small ice cream cart. Cart sales are expected to be $2,500 a year for four years. After the four years, the cart is expected to be worthless as that is the expected remaining life of the cooling system. What is the payback period of the ice cream ...
16 Aug 2021Down Under Boomerang, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2.91 million. The fixed asset will be depreciated straight-line to zero over its three-year tax life. The project is estimated to generate $2,150,000 ...
16 Aug 2021You are considering two mutually exclusive projects with the following cash flows. Which project should you accept if the discount rate is 8.5 percent?
16 Aug 2021You have decided to buy a house. You can get a mortgage rate of 5.5 percent, and you want your payments to be $1,175 or less. How much can you borrow on a 20-year fixed-rate mortgage? (Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "$" sig...
16 Aug 2021Thornley Machines is considering a 3-year project with an initial cost of $1,050,000. The project will not directly produce any sales but will reduce operating costs by $600,000 a year. The equipment is depreciated straight-line to a zero book value over the life of the project. ...
16 Aug 2021Your company is considering the purchase of a new machine. After 4 years of operation, you would sell the machine for a salvage value of $66,416. However, at that time the machine would not have been depreciated to a value of 0, but have a remnant book value of $17,658. The oper...
16 Aug 2021A STRIPS traded on November 1 2013, matures in 14 years on November 1 2027. The quoted STRIPS price is 64.75. What is its yield to maturity? (Use Excel to answer this question.Enter your answer as a percent rounded to 2 decimal places.Omit the "%" sign in your response.)
16 Aug 2021You are interested in purchasing a shoe machine XYZ, especially designed for mens fashion shoes. The machine costs $10,000. You expect to recover $6,000 a year in operating cash flows for only two years because of rapidly changing fashions. You estimate the salvage value of the m...
16 Aug 2021The common stock of the STABBLES Corporation has been trading in a narrow price range for the past month, and you are convinced it is going to break far out of that range in the next three months. You do not know whether it will go up or down, however. The current price of the st...
16 Aug 2021Two retail corporations, both equity financed with no debt, are essentially in the same business. However, whereas one of the corporations has a stable earnings and dividend record, paying out all its earnings in dividends, the other is a growth stock increasing its earnings and ...
16 Aug 2021The current market price of a security is $40, the securitys expected return is 13%, the riskless rate of interest is 7%, and the market risk premium is 8%.Part A: According to CAPM, what is the current beta of this security?Part B: What will be the beta of this security if the c...
16 Aug 2021A firm is reviewing a project with labor cost of $9.60 per unit, raw materials cost of $25.85 a unit, and fixed costs of $16,000 a month. Sales are projected at 11,600 units over the 3-month life of the project. What are the total variable costs of the project?
16 Aug 2021Question 21.) Suppose that you want to buy a 2-year 5% coupon bond, which pays semi-annual coupons and costs $997.Part A: Find the yield to maturity on this bond (YTM)Part B: Find the effective annual rate of return that you earn on this bond (EAR)?
16 Aug 20211. You are a bank examiner and you need to determine the 100-day Value at Risk for a bank with a 99% confidence level (i.e. the lowest 1% of distribution of daily changes). You discovered that the standard deviation of the daily change in asset value is $500,000. You also know th...
16 Aug 2021how do you construct a balance sheet?
16 Aug 2021