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Problem: Valuing Callable Bonds
Illinois Industries has decided to borrow money by issuing perpetual bonds with a coupon rate of 6.0 percent, payable annually. The one-year interest rate is 6.0 percent. Next year, there is a 45 percent probability that interest rates will increase to 8 percent, and there is a 55 percent probability that they will fall to 5 percent. a. What will the market value of these bonds be if they are noncallable? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))
b. If the company decides instead to make the bonds callable in one year, what coupon rate will be demanded by the bondholders for the bonds to sell at par? Assume that the bonds will be called if interest rates fall and that the call premium is equal to the annual coupon. (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))
c. What will be the value of the call provision to the company? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))
Inventory and cost of goods sold and journal entries - Prepare the sales portion of the entry for this sale on Randy's books. and Prepare the cost of sales portion of the entry for this sale on Randy's books.
Kellogg Co. agreed to acquire Keebler Foods Co. for $3.86 billion, or $42 per share. What were Kellogg's objectives in the acquisition?
1 cash flows for an expansion- the discount rate is 9.3 the initial outlay would be 1970000 and cash flow of 460000 per
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Last year Montero Corporation had $850 million of sales, and it had $425 million of fixed assets that were used at only 60% of capacity. What is the maximum sales growth rate the company could achieve before it had to increase its fixed assets?
Explain how interest rate parity can be satisfied and how the forward exchange rate can be set by speculators in reference to the expected future spot exchange rate.
What is the definition of a syndicate?
answer the following questions in one or two well-constructed sentences.a. what happens to the standard error of the
The difference between public and private corporation is that a public corporation has offered its stocks available for purchase through the stock exchange and therefore they have to file quarterly earning reports and its information is available ..
The company does its analysis based on a 10-year store life. We believe the business can be sold for $100,000 after taxes (disposal value) at the end of its 10 year lifer. Using an 10% required return, what is the net present value of this venture..
Calculation of Equated Annual Cost and You are evaluating two different silicon wafer milling machines
It charges MEP $1.25 per share sold. How much money does MEP receive? What is the investment bank's profit? What is the stock price of MEP?
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