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1. Companies use ____ in capital budgeting project analysis because ________. a- accounting profit; that is the total net income; b- after tax cash flow; that is what the owners would receive from the project and reinvest; c- accounting profit; that is what the owners would receive from the project and reinvest; d- after tax cash flow; that is the result of prudent accounting.
2. When borrowing money, you want to know the ____ interest rate because ____.a- nominal; it is the easiest to find; b- effective; it is the true cost of borrowing; c- risk free; that is what the government pays; d- funds; that is what you would pay the bank.
3. Cash available to pay out to the investors after the firm pays for new investments or additions to working capital is _____. a- a statement of cash flows; b- operating after tax cash flow; c- free cash flow; d- net income
4. An organization that raises money from investors and provides financing for individuals and businesses is a ___. a- factor; b- federal government regulatory unit; c- state government taxing authority; d- financial intermediary
5. In finance, 1 Point is ____ and Points are used by lenders to _____. a- a clause in the loan agreement; make loans more affordable for the borrower; b- used on a simple interest loan; improve the loan process; c- one percent; make more profit for the lender.
Buffelhead's stock price is $234 and could halve or double in each six-month period (equivalent to a standard deviation of 96%). Assume that you own an American put option on Buffelhead stock with an exercise price of $234. The interest rate is 19% a..
High electricity costs have made Farmer Corporation’s chicken-plucking machine economically worthless. Only two machines are available to replace it. The International Plucking Machine (IPM) model is available only on a lease basis. How much debt is ..
GROWTH VALUATION Thomas Brothers is expected to pay a $0.50 per share dividend at the end of the year. The dividend is expected to grow at a constant rate of 7% a year. The required rate of return on the stock, rs, is 15%. What is the stock’s current..
A local engineering firm just bought a new office building (CCA=4%) for $500,000. Useful life of 30 years is expected with no salvage value. If tax rate is 40%, and required rate is 10%, then what is the present value of this building's tax shields?
You are bullish on Telecom stock. The current market price is $48 per share, and you have $9,600 of your own to invest. You borrow an additional $9,600 from your broker at an interest rate of 3.0% per year and invest $19,200 in the stock. What will b..
Suppose the interest rate on a 2-year treasury security is 4.75% and the interest rate on a 5-year treasury security is 6.20%. Assuming that the pure expectations theory is correct, what is the market’s estimate of the 3-year treasury rate two years ..
As a consultant to GBH skiwear, you have been ask to compute the appropriate discount rate to use to evaluate the purchase of a new warehouse facility. What discount rate should you use to evaluate the warehouse projects? Calculate the weights of cap..
A 10-year U.S. Treasury bond with a face value of $10,000 pays a coupon of 6.5% every six months. The semi annually compounded interest rate is 5.0%. What is the present value of the bond?
Tampa Manufacturing, an established producer of printing equipment, expects its sales to remain flat for the next 3 to 5 years because of both a weak economic outlook and an expectation of little new printing technology development over that period. ..
Travel America Coaches currently sells 15,000 motor homes per year at $94,000 each, and 1,500 luxury motor coaches per year at $159,000 each. The company wants to introduce a low-range camper to fill out its product line; it hopes to sell 6,000 of th..
You bought one of Bergen Manufacturing Co.’s 7.8 percent coupon bonds one year ago for $1,061. These bonds make annual payments and mature twelve years from now. Suppose you decide to sell your bonds today when the required return on the bonds is 4.5..
A coupon bond paying semi annual interest is reported as having an ask price of 126% of its $1,000 par value. If the last interest payment was made one month ago and the coupon rate is 6%, what is the invoice price of the bond?
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