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In 1985, R. J. Reynolds (RJR for short) acquired Nabisco Brands and financed the deal with a variety of financial instruments, including three dual-currency Eurobonds. The first dual-currency bond, leadmanaged by Nikko, raised JPY25 billion (equivalent to USD105.5 million at the time of issue). Coupons were paid in yen, but the required final principal payment was not JPY25 billion but USD115.956 million. The coupon was 7.75%, even though a comparable fixed-rate Euroyen bond at that time carried only a 6.375% coupon. The actual 5-year forward rate at the time was around JPY200/USD.
a. Given the "fat" coupon, is this bond necessarily a great deal for the investors?
b. At maturity, in August 1990, the exchange rate was actually JPY144/USD.
Was the bond a good deal for investors?
In 2011, a running back signed a contract worth $70.9 million. The contract called for $11.5 million immediately and a salary of $4.3 million in 2011, $11.1 million in 2012, $11.5 million in 2013, $10.2 million in 2014 and 2015, and $12.1 million in ..
What is the typical relationship between the standard deviation of an individual common stock and the standard deviation of a diversified portfolio of common stocks?
Suppose that stock L sells for $50 today and is expected to pay a dividend of $3.00 at the end of one year. Firm L's beta is 1.20, the market expected return is 10%, and the riskless return is 3%. Using the CAPM and an assumption about market equilib..
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Briefly define reverse leveraged buyouts. How have companies that have engaged in reverse LBOs performed relative to their industry peers that have not engaged in such deals? Cite relevant research to support your conclusions.
A person at retirement is expected to receive a fully taxable Lump-Sum distribution of $245,000. What will be the effective tax rate on this distribution based on 10 year Forwarding Average rate? Use 1986 Income Tax Rate Table for Ten Year Averaging ..
Compute the effect of this estimated change in inflation on the price of a 15-year, 10% coupon bond with a current yield to maturity of 8%.
One year ago, an American investor bought 2000 shares of London Bridges at a price of £24 (or 24 UK pounds) per share when the exchange rate was $1.4/1£ (or $1.40 dollars = 1 pound). The investor also invested 4,000,000 Japanese Yen in a money market..
Think of something you want or need for which you currently do not have the funds. It could be a vehicle, boat, horse, jewelry, property, vacation, college fund, retirement money, etc. Select something which costs somewhere between $2,000 and $50,000..
A man is planning to retire in 25 years. He wishes to deposit a regular amount every three months until he retires, so that, beginning one year following his retirement, he will receive annual payments of $60,000 for the next 10 years. How much must ..
Two firms, A and B, both produce widgets. The price of widgets is $1 each. Firm A has total fixed costs of $500,000 and variable costs of 50¢ per widget. Firm B has total fixed costs of $240,000 and variable costs of 75¢ per widget. If the economy is..
Payment dates. Determine when a firm must pay for purchases made and invoices dated on November 25 under each of the following credit terms
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