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A homeowner took out a 20-year, fixed-rate mortgage of $350,000. The mortgage was taken out 10 years ago at a rate of 5.40 percent. If the homeowner refinances, the charges will be $2,500. What is the highest interest rate at which it would be beneficial to refinance the mortgage?
A $1,000 face value bond is currently quoted at 101.2. The bond pays semiannual payments of $28.50 each and matures in six years. What is the coupon rate?
Armstrong Faber produces a standard number-two pencil called Ultra-Lite. Since Chuck Armstrong started Armstrong Faber, sales have grown steadily. With the increase in the price of wood products, however, Chuck has been forced to increase the price o..
Calculate the Weighted Average Cost of Capital given the following information: Target capital structure: 60 percent stock, 30 percent debt, 10 percent preferred stock ; cost of equity is 12 percent; cost of debt is 7 percent; cost of preferred stock..
Assume you received $8,000 five years from today. Calculate the present value of the $8,000 if your investments pay. Discuss your answer. Specifically, what do your answers to these questions tell you about the relation between present values and int..
Amy is 12 years old now and will attend college at age 18. Her parents plan to fund her college for four years. College costs $20,000 per year as of the time when Amy turns to age 18. If her parents have saved $10,000 for this goal. What’s PV of Amy’..
Consider an asset that costs $664,000 and is depreciated straight-line to zero over its eight-year tax life. The asset is to be used in a five-year project; at the end of the project, the asset can be sold for $178,000. If the relevant tax rate is 35..
The ABC Company has gathered the following information about the cash flows associated with a capital budgeting opportunity. The Project will cost $10,000,000 to implement, and has a three year estimated economic life. What are the annual net cash fl..
A company is 37% financed by risk-free debt. The interest rate is 12%, the expected market risk premium is 10%, and the beta of the company’s common stock is 0.62. What is the company cost of capital? What is the after-tax WACC, assuming that the com..
question if the beta of exxon mobil is 0.65 risk-free rate is 4 and the market rate of return is 14 evaluate the
Suppose oil forward prices for 1-, 2-, and 3-year contracts are $20, $21, and $22. The 1-year effective annual interest rate is 6%, the 2-year interest rate is 6.5%, and the 3-year interest rate is 7%. What is the price of a 2-year swap beginning in ..
Collect annual data on 1-year T-security rate (nominal rate of interest). Using the inflation rate data in #1, compute the "real rate of interest" for each year. (Hint: Fisher equation)
What is the future value of $1,590 in 16 years assuming an interest rate of 9.75 percent compounded semi-annually? (Enter rounded answer as directed, but do not use rounded numbers in intermediate calculations. Round your answer to 2 decimal places (..
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