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(Bond valuation) Pybus Inc. is considering issuing bonds that will mature in 17 years with an annual coupon rate of 11%. Their par value will be $1,000, and the interest will be paid semiannually. Pybus is hoping to get an AA rating on its bonds and, if it does, the yield to maturity on similar AA bonds is 11.5%. However, Pybus is not sure whether the new bonds will receive an AA rating. If they receive an A rating, the yield to maturity on similar A bonds is 12.5%. What will be the price of these bonds if they receive either an A or AA rating? (Round to the nearest cent.)
brown ltd operates outdoor amusement centres in a number of country towns. the company has decided to build another
Ollie Mace has recently been appointed controller of S. Dilley & Company, a family-owned manufacturing firm founded 28 years ago. The firm manufactures automotive parts. Its four major operating divisions are heat treating, extruding, small parts sta..
Stock A will return 15 percent in a normal economy and lose 14 percent in a recession. Stock B deals with inferior goods and will return 7 percent in a normal economy and 18 percent in a recession. There is a 20 percent chance of a recession occurrin..
Cochrane, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2,430,000. The fixed asset will be depreciated straight-line to zero over its three-year tax life, after which time it will be worth..
The current price of a non-dividend-paying stock is $30. Over the next six months it is expected to rise to $36 or fall to $26. Assume the risk-free rate is zero. What long position in the stock is necessary to hedge a short call option when the stri..
Sisters Corp expects to earn $8 per share next year. The firm’s ROE is 15% and its plowback ratio is 60%. If the firm’s market capitalization rate is 10%. Calculate the price with the constant dividend growth model. Calculate the price with no growth..
The recapture of net working capital at the end of a project will __________
You are considering a $495,000, 15 year, monthly amortizing price level adjusted mortgage (PLAM) at 3% real interest rate. The inflation in first 5 years is expected to be at 4%, in the next 5 years at 5%, and in the final five years at 2%. Develop a..
Payments of $2600, due 50 days ago, and $3100, due in 40 days, are to be replaced by $3000 today and another payment in 30 days. What must the second payment be if the payee is to end up in an equivalent financial position, Money now earns 8.25% simp..
Inflation is expected to be 5% next year and a steady 7% each year thereafter. Maturity risk premiums are zero for one-year debt but have an increasing value for longer debt. One-year government debt yields 9%, whereas two-year debt yields 11.9%. Wha..
What is the cost percentage of a new common stock issue?
A project has just completed its 87th item in the project plan. It was scheduled to have spent $168,000 at this point in the plan, but has actually spent only $156,000. The project manager estimates that the value of the work actually finished is nea..
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