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On March 1, a firm plans to borrow $10 million for 90 days beginning on April 1(31 days in the future, which is the maturity of the call). It can currently borrow at LIBOR plus 200 basis points, and LIBOR is currently 4.5%. The firm buys an interest rate call option where LIBOR is the underlying, and the strike rate is 4%. The notional principal is $10 million, and D=90 days, which is also the length of the loan. The premium of the call is $5,000. Calculate the effective borrowing rates of the loan when LIBOR is 2.0%, 3.5%, 4.0%, 4.5% and 6%.
Louise Manufacturing uses 2,200 switch assemblies per week and then reorders another 2,200. The relevant carrying cost per switch assembly is $8.50, and the fixed order cost is $1,100. What are the current carrying costs?
City Tire has issued 100 convertible bonds with a conversion ratio of 20. Currently the bonds have not been converted and City Tire has 3,000 shares of common stock outstanding. What is the lowest stock price at which a convertible bondholder would f..
International Exchange has three divisions: A, B, and C. Division A has the least risk and Division C has the most risk. The firm has an aftertax cost of debt of 6.1percent and a cost of equity of 14.3 percent. The firm is financed with 37 percent de..
Do project financial results affect financial health of the entire organization? Can you think of an example where the reverse holds true as well -- in other words, an example where the financial health of an organization affected project outcomes?
The yield of strawberry plants depends on the amount of fertilizer fed to the plants. Agricultural research shows that an acre of strawberry plants will yield 500 pounds of strawberries when 50 cubic feet of fertilizer are applied. If 70 cubic of fee..
You’ve just joined the investment banking firm of Dewey, Cheatum, and Howe. They’ve offered you two different salary arrangements. You can have $8,300 per month for the next three years, or you can have $7,000 per month for the next three years, alon..
Determine the actual return for the fund over the 12 months ending October 2013. (This requires you to obtain prices and cash distributions from a source such as Yahoo Finance.) If an investor invested $10,000 at the end of October 2012, how much wou..
Given the following information and using the Taylor rule, calculate the target for the federal funds rate for October 2012 Equilibrium real federal funds rate of 2% Target inflation rate of 2% Current inflation rate of 1.2% Output gap negative 5.9%...
1.many would argue that investment in small businesses has slowed in recent years. nbspwhat factors could you identify
Using the above cash flows, calculate the following for each project. Assume a 11% required return a. NPV b. Payback Period c. Discounted Payback Period d. IRR e. MIRR. Assuming independent projects, provide an accept/reject decision for each capital..
You will document your understanding and learning relative to the course requirements as summarized in the course description. This must include how you will or could use the learning in your personal and/or professional decision making.
Suppose a company has no debt outstanding and a total market value of $90,000. Earnings before interest and taxes, EBIT, are projected to be $8,000 if economic conditions are normal. If there is strong expansion in the economy, then EBIT will be 20 p..
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