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A Manufacture ring firm determines that its payout period schedule for worker's compensation is a s follows:
Year Payout %
1 25
2 35
3 40
If the firm insures this exposure, the premium will be $750,000 payable upon inception of the policy. The premium represents 60% loss and 40% administrative expense.
a) Demonstrate and explain if there are any cash flow advantages of detaining this loss of the firm's cost of capital so 7%. Show all calculations and support you recommendation.
b) Identify 2 potential disadvantages of retention.
What is the yield to maturity (YTM) of a zero coupon bond with a face value of $1,000, current price of $730 and maturity of 7 years? Recall that the compounding interval is 6 months and the YTM, like all interest rates, is reported on an annualized ..
Sell on term 1/10, net 30. Gross sales last year $4,821,500 and accounts receivable averaged $434,500. Customers paid on tenth day and took discount. What are the nominal and effective cost of trade credit to non discount customers
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Describe five different investment strategies. Which of these investment strategies do you personally favor? Why? What types of investments fit best with your strategy?
On January 1st, an investment is worth $100. On April 19th, the value is $95 and $2X is deposited right afterwards. On October 30th, the value is $105 and $X is deposited right afterwards. On January 1st of the following year, the investment is worth..
question 1the current yield on a 5000 8 percent coupon bond selling for 4000 is5.8.10.20.none of the above.question
The Company is a well-known and reputable supplier of integrated circuits to manufacturers of telecommunications devices. The Company is currently debating whether to expand its sales to a new market. Calculate additional net income from the new sale..
Primrose Corp has $17 million of sales, $2 million of inventories, $3 million of receivables, and $1 million of payables. Its cost of goods sold is 85% of sales, and it finances working capital with bank loans at an 7% rate. What is Primrose's cash c..
Explain the diversification benefits of real estate in a portfolio. Given the numerous options examined for real estate investment which do you feel is the optimal route for your portfolio? Provide the rationale for the choices you make. Differentiat..
what is the required return using the capital asset pricing model if a stock's beta is 1.2 and the individual, who expects the market to rise by 11.2%, can earn 4.4% invested in risk -free Treasury bill?
Dizzy Corporation’s 10-year semi annual bond bearing a coupon rate of 12% is currently selling for $950. Given this information, which of the following is the correct valuation equation for this bond? Note: PVIFA(r,t) = [{1-1/(1+r)t}/r] and PVIF(r,t)..
Tank Ltd is considering undertaking the purchase of a new piece of equipment that is expected to increase revenue by $12,000 each year for six years. The equipment will increase costs $4,000 each year for six years. what is the machine's net cash flo..
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