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Ralph, treasurer for M and M Products, Inc., recently updated his firm’s short-term cash forecast only to discover that the firm will suffer a cash shortage of $15 million for a period of 30 days. One alternative is to liquidate a portion of his marketable securities portfolio but with interest rates up, this is not a good alternative. Ralph just learned from one of his commercial paper dealers that paper in the thirty-day range is in demand and that asked discount rates are comparably good at about 3.7%. The dealer’s annual fee is 10 basis points and the annual commitment fee on a back up line of credit is 25 basis points.
Estimate the effective cost of the commercial paper assuming that this is the only commercial paper issue planned for the year.
Estimate the effective cost of the commercial paper assuming that there will be recurring issues of commercial paper all year long.
Volbeat Corporation has bonds on the market with 15.5 years to maturity, a YTM of 10.4 percent, and a current price of $944. The bonds make semi-annual payments.
Project K costs $35,000, its expected cash inflows are $10,000 per year for 8 years, and its WACC is 9%. What is the project's discounted payback?
Analyze the performance of Timco. This year: ATO=1.4, GPM=.26, EM=1.8, Interest Retention=.81, Tax Retention=.66. Last year: ATO=1.2, GPM=.29, EM=1.6, Interest Retention=.84, Tax Retention=.69.
Gateway Communications is considering a project with an initial fixed asset cost of $2.46 million which will be depreciated straight-line to a zero book value over the 10-year life of the project. At the end of the project the equipment is scrapped. ..
Discuss the following statement: “If a firm has only independent projects, a constant WACC, and projects with normal cash flows, then the NPV and IRR methods will always lead to identical capital budgeting decisions.” What does this imply about the c..
Assume that you are the portfolio manager of the Delaware Fund, a $4 million mutual fund that contains the following stocks: Stock Amount Beta A $ 400,000 1.50 B $ 600,000 0.50 C $1,000,000 1.25 D $2,000,000 0.75. The required rate of return in the m..
Suppose that you bought Mike Inc. three years ago at $20.50 per share and you can now sell it for 21.74 per share now. Also, Mike Inc. has paid an annual dividend of $0.50, $0.47, and $0.63 in years one, two, and three. Ignoring the issue of Time Val..
An asset has had an arithmetic return of 11.7 percent and a geometric return of 9.7 percent over the last 82 years. What return would you estimate for this asset over the next 6 years? 21 years? 37 years?
You have the opportunity to purchase an investment that will generate cash flow of $1,568 per year for the next 25 years. If you pay $10,700 dollars for this investment, what annual rate of return would you earn?
Consider the expectations theory (of the term structure) with a term premium. What is the interest rate on a 5-year bond today if the term premium for a 5-year bond is 2% and 1-year interest rates are expected to remain constant at their current leve..
Which one of the following is a requirement of the two-stage dividend growth model? Which one of the following statements concerning beta is correct? Main Street Antiques is planning on paying an annual dividend of $2.20 per share next year. The comp..
J.W. Kingdon describes the agenda setting stage of policy formulation as a function of the confluence of three "streams" of activities: problems, possible solutions to the problems, and political circumstances
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