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Do problem 1 over again, this time assuming more realistically that a swap bank is involved as an intermediary. Assume the swap bank is quoting five-year dollar interest rate swaps at 10.7% - 10.8% against LIBOR flat.
The risk-free rate is 3%, the expected market rate of return is 9%, if you expect a stock with a beta of 1.5 to offer a rate of return of 12%, you should. You are considering acquiring a common stock that you'd like to hold for one year. You expect t..
Suppose that Ken-Z Art Gallery has annual sales of $894,000, cost of goods sold of $584,000, average inventories of $170,000, average accounts receivable of $139,000, and an average accounts payable balance of $64,000. Assuming that all of Ken-Z’s sa..
O’Connell & Co. expects its EBIT to be $42,000 every year forever. The firm can borrow at 6 percent. O’Connell currently has no debt, and its cost of equity is 10 percent and the tax rate is 35 percent. The company borrows $108,000 and uses the proce..
The beta associated with a risk free asset ___.
Wells Fargo offers to lend you $50,000 at a nominal rate of 6.0%, simple interest, with interest paid quarterly. An offer to lend you the $50,000 also comes from Citibank, but it will charge 6.0%, simple interest, with interest paid at the end of the..
Suppose firm XYZ has AR (Accounts Receivable) = 500, Sales = 3000, Inventory = 300, Cost of Goods Sold = 1200, and AP (Accounts Payable) = 100. How much cash does firm XYZ save if it reduces its Days Sales Outstanding by 10 days? What are specific ac..
Financial statements and financial reports are your friend. From a company's annual report (10-K), which is the most important type of statement? Why? Optional: Depreciation is how a business uses its assets. Which depreciation method would you recom..
Your firm has an average collection period of 30 days. Current practice is to factor all receivables immediately at a discount of 2 percent. What is the effective cost of borrowing in this case?
A put option is currently selling for $5.70. It has a strike price of $50 and seven months to maturity. The current stock price is $57. The risk-free rate is 4.6 percent, and the stock will pay a $2.70 dividend in two months. What is the price of a c..
Calculate Laurel’s portfolio beta for last year and for this year. Assume that the changes in investment (value) come from changing stock prices rather than buying and selling shares. What has happened to the riskiness of Laurel’s portfolio? Should s..
During 2003, a sculpture was sold at auction for a price of $10,313,500. Unfortunately for the previous owner, he had purchased it in 1999 at a price of $12,370,500. What was his annual rate of return on this sculpture?
The greatest number of businesses in the United States are corporations. Which of the following is a basic source of funds for the firm?
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