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The Zinn company plans to issue $10,000,000 of 20-year bonds in June to help finance a new research and development laboratory. The bonds will pay interest semiannually. It is now November, and the current cost of debt to the high-risk biotech company is 11%. However, the firm's financial manager is concerned that interest rates will climb even higher in coming months. The following data are available:Futures price: Treasury Bonds- $100,000; pts- 32nds of 100Delivery mo Open High Low Settle Change Open InterestDecember 94-28 95-13 94-22 95-05 +7 591,944Mar 96-03 96-03 95-13 95-25 +8 120,353June 95-03 95-17 95-03 95-17 +8 13,597Create a hedge with the futures contract for Zinn Company's planned June debt offering of $10 million. What is the implied yield on the bond underlying the future's contract?
a) Use the given data to create a hedge against rising interest ratesb) Assume that the interest rates in general increase by 200 basis points. How well did your hedge perform?c) What is a perfect hedge? Are any real-world hedges perfect? Explain
Explain why the cost of debt is typically different than the cost of equity. Give examples and explain your answers.
In January 1914, Henry Ford startled the world by announcing that Ford Motor Company would pay $5 a day to its workers. At the time, $5 was about double what the average auto worker made.
A corporation is not expected to generate a FCF over the next four years. Five years from now, the company anticipates that it will generate a FCF of $1.
Dayco operates industry average ratios are these: return on assets: 11%; asset turnover: 2.5 times; Net profit margin: 3.6 %. Compare Dayco's performance against the industry averages.
Find out and examine the reasons behind Goldman Sachs' decision to become the public company. Consider the influence of competing market forces and timing on this decision.
The company's 2011 income statement showed a depreciation expense of $385,000. What was net capital spending for 2011?
Discuss the journal entries for the original issue and the early redemption.
Determine effective borrowing rate for a 1-year line of credit, if the total credit line = $3,000,000, average loan outstanding = $1,400,000, commitment fee = 0.5 percent on the unused portion,
Suppose the December CBOT Treasury bond futures contract has a quoted price of 80-07. What is the implied annual interest rate inherent in the futures contract?
What is the difference between proactive and reactive recruitment? Where would you use each method?
Delta Distributors has an investment in accounts receivable of $2,750,000. Daily credit sales are $118,280. If 30 percent of Delta's credit customers receive a discount by paying within ten days and the remainder of Delta's consumers pay in 40 days.
Monroe marks up its goods at 40% on cost. At the end of the year, ending inventory showed 105 units remaining. calculate the amount of sales assuming a FIFO flow of inventory.
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