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Atlas Anglers Inc. is considering issuing a 15-year convertible bond that will be priced at its $1,000 par value. The bonds have a 6.5% annual coupon rate, and each bond can be converted into 20 shares of common stock. The stock currently sells at $30 a share, has an expected dividend in the coming year of $3, and has an expected constant growth rate of 5.5%. What is the estimated floor price of the convertible at the end of Year 3 if the required rate of return on a similar straight-debt issue is 9.5%?
You have just taken out a 5 year loan from a bank to purchase an engagement ring. The ring costs $5,000. You plan to put $1,000 down and borrow $4,000.
Now answer part (A) assuming that the annuity will end with your friend's life, he is currently 45 years old. Show your calculations.
A bank offers two 30 year, fixed rate, fully amortizing LPMs: an 85% LTV loan at 6%, and an 80% LTV loan at 5.5%. What is the marginal cost of borrowing if the loan is going to be held for 10 years?
The average credit sales for Jiffy Co. is $375,000. Accounts receivables average balance is $68,000. Jiffy factors its receivables by discounting them 3%. What is the effective cost of factoring?
Suppose your corporation has asked you to determine the financial risks of manufacturing 6,000 units of a product rather than purchasing them from a vendor at $66.50 each unit.
How does compounding increase debt? Does it involve the compounding interest causing the debt to continue to rise or never seeming to go down if you only pay the minimum payments on the debt?
You recently obtained a 30-year, monthly payment. $250,000 mortgage with a 7 percent nominal interest rate.
The expected return for security is 20 percent and standard deviation- 25.7 percent. Compute expected return and standard deviation for security A
Assuming a company does not have enough excess retained earnings to fund future projects that have positive NPV's, they would have to sell debt or issue new capital. Issuing new capital is often thought of as a negative sign to current stock holders,..
The old press was purchased 2 years ago for an installed cost of $35,000 and can be sold for $20,000 net of any removal costs today. Both presses are depreciated under the MACRS 5-year recovery schedule. The firm is in 40 percent marginal tax rate..
An investor makes monthly payments to a mutual fund for 36 months. The fund earns .5% per month. How much will the investor have at the end of the 30 months if payments of $250 are made at the first of each month?
Why would it be challenging to properly compare the performance of an equity fund to a fixed-income market?
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