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You are analyzing the after-tax cost of debt for a firm. You know that the firm’s 12-year maturity, 10.40 percent semi-annual coupon bonds are selling at a price of $1,189.84. These bonds are the only debt outstanding for the firm.
What is the current YTM of the bonds? (Round intermediate calculations to 4 decimal places, e.g. 1.2514 and final answer to 2 decimal places, e.g. 15.25%.)
YTM = %
Thora is considering buying a BMW bond for $674.205. This bond has a maturity value of $757, maturing in 3 years, with comparable interest rates of 12%, and coupon payments of $43. What should she pay?
In your own simple words, compare the usefulness of the IRR rule and NPV rule for capital budgeting decisions. Explain how they are connected and outline how to give meaning to the imaginary roots of the IRR equation.
The closest approximation to the real, risk-free rate of interest is
Hughes Co. is growing quickly. Dividends are expected to grow at a rate of 26 percent for the next three years, with the growth rate falling off to a constant 8 percent thereafter. If the required return is 15 percent and the company just paid a $3.5..
An asset has had an arithmetic return of 10.3 percent and a geometric return of 8.3 percent over the last 90 years. What return would you estimate for this asset over the next 10 years? 25 years? 30 years?
A home identical to yours in your neighborhood, sold last week for $150,000. Your home has a $120,000 assumable, 8% mortgage (compounded annually) with 30 years remaining. An assumable mortgage is one that the new buyer can assume at the old terms, c..
Beckett, Inc., has no debt outstanding and a total market value of $140,000. Earnings before interest and taxes, EBIT, are projected to be $32,000 if economic conditions are normal. If there is strong expansion in the economy, then EBIT will be 12 pe..
Linda borrows $18,500 from the bank at 12% APR interest compounded monthly to be repaid in 36 equal monthly instalments. What is her monthly payment? What is the interest paid in the first month? What is the principal paid in the first month?
Seattle Health Plans currently uses zero debt financing. Its operating profit is $1 million, and it pays taxes at 40 percent rate. It has $5 million in equity. Suppose the firm is considering replacing half of its equity financing that bears an inter..
You are planning to deposit $1,000 in a savings account. Account A compounds semi annually while account B compounds monthly. If both accounts have the same quoted annual rate of interest, you should choose _______________.
Cnooc, a Chinese public-sector company, has made a bid to purchase Unocal, a big U.S oil company, for $18.5 billion in June 2005. Treat this as an initial investment made by Cnooc in this two-year, U.S based project. If it now purchased Unocal in Au..
Joe Meat Corp. is considering replacing its old freezer with a new one that has more capacity. The company estimates that it can sell more meat products with and estimated increase of $15,000. What is the net present value of the freezer if the requi..
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