Issue floating-rate debt at libor

Assignment Help Financial Management
Reference no: EM13935153

Carter Enterprises can issue floating-rate debt at LIBOR +1 percent or fixed-rate debt at 9.00%. Brence Manufacturing can issue floating-rate debt at LIBOR +2.4% or fixed-rate debt at 12%. Suppose Carter issues floating-rate debt and Brence issues fixed-rate debt. They are considering a swap in which Carter will make a fixed-rate payment of 7.30% to Brence, and Brence will make a payment of LIBOR to Carter. What is the net payment for Carter if they engage in the swap? A negative net payment should be indicated with a minus sign. Round your answer to two decimal places.

___%

What is the net payment for Brence if they engage in the swap? A negative net payment should be indicated with a minus sign. Round your answer to two decimal places.

-(LIBOR + ___%)

Reference no: EM13935153

Questions Cloud

Assuming that relative purchasing power parity exists : Currently, you can exchange 100 for $126.48. The inflation rate in Euroland is expected to be 2.8% as compared to 3.4% in the U.S. Assuming that relative purchasing power parity exists, the exchange rate 2 years from now should be:
What is the present value dollars for all cash flows : A manufacturing company invests $100,000 in a new piece of equipment. Operating expenses for this new piece of equipment is estimated to be $4,000 starting EOY 1 and increasing by $200 per year at the EOY2 and for the next 9 additional years. What is..
What direct labour cost should have been incurred to make : According to the standards, what direct labour cost should have been incurred to make 19,400 units of the Jogging Mate? By how much does this differ from the cost that was incurred? Break down the difference in cost from (1) above into a labour rate ..
Calculate the actual cost per unit in april : Calculate the actual cost per unit in April and the budgeted cost per unit in May. Explain why the cost per unit is expected to decrease.
Issue floating-rate debt at libor : Carter Enterprises can issue floating-rate debt at LIBOR +1 percent or fixed-rate debt at 9.00%. Brence Manufacturing can issue floating-rate debt at LIBOR +2.4% or fixed-rate debt at 12%. What is the net payment for Brence if they engage in the swap..
What is the expected exchange rate five years : The spot rate on the Canadian dollar is 1.24. Interest rates in Canada are expected to average 2.8% while they are anticipated to be 3.1% in the U.S. What is the expected exchange rate five years from now?
Explain how the competitive labor market functioned : Explain how the competitive labor market functioned before the buyout of the independent farms. How was the wage rate and quantity of workers employed in the market determined?
Coupon bonds on the market-current bond price : Aloha Inc. has 5.5 percent coupon bonds on the market that have 10 years left to maturity. If the YTM on these bonds is 6.42 percent, what is the current bond price?
The current spot rate-expected inflation rate : The current spot rate between the U.K. and the U.S. is £0.5331 per $1. The expected inflation rate in the U.S. is 4.5%. The expected inflation rate in the U.K. is 3.6%. If relative purchasing power parity exists, the exchange rate next year will be:

Reviews

Write a Review

Financial Management Questions & Answers

  Impressive growth in sales over the past several years

The growing Internet retailer "Nile" corporation has shown impressive growth in sales over the past several years, with sales this past year at $220 million. If the company has a net profit margin of 1.5%, what would its net profit be? $____ million.

  What is your estimate of the current stock price

Ernie Manufacturing has projected sales of $155 million next year. Costs are expected to be $100 million and net investment is expected to be $17.5 million. Each of these values is expected to grow at 14 percent the following year, with the growth ra..

  What are the main aspects of accounting standard

Calculate the net cash flow from financing activities based and discuss in brief the treatment of following items in Cash Flow Statement - Calculate the net cash flow from financing activities

  Tandard deviation of the minimum variance portfolio

The stock of Bruin, Inc., has an expected return of 25 percent and a standard deviation of 38 percent. The stock of Wildcat Co. has an expected return of 12 percent and a standard deviation of 43 percent. The correlation between the two stocks is .43..

  How would each of these plans affect earnings per share

Edsel Research Labs has $27 million in assets. Currently, half of these assets are financed with long-term debt at 5 percent and half with common stock having a par value of $10. Ms. Under Plan E, 675,000 shares of stock would be sold at $10 per shar..

  Initial outlay of resulting in single free cash flow

Determine the IRR on the following projects: a. an initial outlay of $10,000 resulting in a single free cash flow of $1,844 after 11 years. b. an initial outlay of $10,000 resulting in a single free cash flow of $2,039 after 20 years.

  Estimate ventures constant growth rate

Estimate a venture’s constant growth rate (g) based on the following information: terminal value = $400,000; current year’s net income = $20,000; next year’s expected cash flow = $25,000; and a required rate of return of 20%.

  Firms operating cycle and cash conversion cycle

Domos Corporation turns its inventory five times each year, has an average payment period of 25 days, and has an average collection period of 32 days. Calculate the firm’s operating cycle and cash conversion cycle. Calculate the firm’s total resource..

  Users of financial statements

Explain whether users of financial statements should exercise caution when interpreting financial statement compliant with GAAP and explain how the choice of depreciation method affects reported profits.

  Established pattern of increasing its dividends

The common stock of Auto Deliveries sells for $26.96 a share. The stock is expected to pay $1.90 per share next year when the annual dividend is distributed. Auto Deliveries has established a pattern of increasing its dividends by 4.7 percent annuall..

  Differences between common and preferred stock

With respect to the differences between common and preferred stock, ________ stock has cumulative dividends meaning that, even if some divided payments are skipped, investors will still reap the dividends payments sometime in the future. Conversely, ..

  Auditors ethics be challenged while performing an audit

It is the responsibility of management to apply accounting standards when communicating with investors and creditors through financial statements. How might an auditor's ethics be challenged while performing an audit?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd