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Bowdeen Manufacturing intends to issue callable, perpetual bonds with annual coupon payments. The bonds are callable at $1,250. One-year interest rates are 11 percent. There is a 60 percent probability that long-term interest rates one year from today will be 13 percent. There is a 60 percent probability that long-term interest rates one year from today will be 13 percent, and a 40 percent probability that they will be 9 percent. Assume that if interest rates fall the bonds will be called. What coupon rate should the bonds have in order to sell at par value?
For purposes of diversification, what type of correlation coefficient among assets returns is preferred by investors? Provide a brief explanation.
Computation of price of the bond and The market requires an interest rate of 8% on bonds of this risk
Should someone put more emphasize on one type over the other? These two methods are only two approaches in an entire arsenal of ways of analyzing a corporation.
Epsilon Company is evaluating an expansion of its business. The cash-flow forecasts for the project are as follows:
If the lathe can be sold for $4,800 at the end of year 3, what is the after-tax salvage value?
If the beta of Microsoft is 1.11, risk-free rate is 3% and the market risk premium is 8%, calculate the expected return for Microsoft.
The company generated $9 million in net income and paid $2 million in dividends. Construct the current balance sheet reflecting the changes that occurred at Information Control Corp. during the year.
The trading cost per sale or purchase of marketable securities to be $55 per transaction. What will be their optimal cash return point?
Your firm is interested in acquiring a high tech firm to expand its business. It is considering making the acquisition usingcash, stock, or a combination of both.
Axel Telecommunications has a target capital structure that consists of 70 percent debt and 30 percent equity. What will be its dividend payout ratio?
If the stockholders' required rate of return is 15 percent, what is the expected dividend yield and expected capital gains yield for the coming year?
Jenks Corporation takes a full year's depreciation expense in the year of an asset's acquisition and no depreciation costs in the year of disposition.
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