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On January 15, a firm takes out a loan of $30 million, with interest payments to be made on April 16, July 15, October 14, and the following January 15, when the principal will be repaid. Interest will be paid at LIBOR based on the rate at the beginning of the interest payment period, using the exact number of days and a 360-day year. The firm wants to buy a cap with an exercise rate of 10 percent and a premium of $125,000 but is concerned about the cost. Its bank suggests that the firm sell a floor with an exercise rate of 9 percent for the same premium. The current LIBOR is 10 percent. Determine the firm's cash flows on the loan if LIBOR turns out to be 11.35 percent on April 16, 10.2 percent on July 15, and 8.86 percent on October 14. If you have a financial calculator or spreadsheet, determine the internal rate of return and annualize it to determine the cost of borrowing.
How high would inflation have to be in order for the balance of your loan to only be worth a real $50,000, expressed in today's dollars, at the end of 5 years? Express your answer in annually compounding terms.
An office building is available for sale in Parma Heights. Cash flows from rent amount to $53,000 per year, every year, for the next ten years. Financing arrangements are made to borrow at 6.85%. The cost to buy the buidling is $350,000. Calculate..
If the P/E ratio on the S&P 500 is 10, given historical earning growth patterns, what would be a reasonable estimate of long-run future expected rates of return on the stock market? Assume a long-run inflation rate of 2.5 per annum.
Discuss the various financial instruments and the impact of speculation on availability of funding for companies.
You're given a business opportunity to spend $12000 in Joe's Bakehouse. He offers to pay you $6000 in two year's time and then $11000 in 4 years' time. Find out the internal rate of return without using Excel.
two months from today you plan to borrow 3 million for 6 months at libor. you hedge your interest rate risk with a euro
Use the following assumptions to answer the questions below: (1) Operating ratios remain unchanged. (2) Sales will grow by 10%, 8%, 5%, and 5% for the next four years. (3) The target weighted average cost of capital (WACC) is 9%. This is the N..
kristi is considering an investment that will pay 5000 a year for 7 years starting one year from today. how much should
Subsequent annual cash flows will grow at 3.5 percent in perpetuity. What is the present value of the technology if the discount rate is 10 %.
Suppose the projections given for price, quantity, variable costs, and fixed costs are all accurate to within ±10 percent.
xyz company has a cost of capital of 9.8 percent. the companys cost of equity is 15 percent and its cost of debt is 7.5
current liabilities of a company are rs 560000 current ratio is 52 quick ratio is 21. find the value of
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