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Firms X and Y are identical in all respects except for capital structure. These firms operate in a tax-exempt haven where firms and individuals pay no taxes at all. Current data on the financial structure of the two firms is as follows:
Firm X: 1,000 shares outstanding, current market price of $10 per share
100 bonds outstanding with a current bond price of $100 per bond
Firm Y: 2,000 shares outstanding, current market price of $9 per share
50 bonds outstanding with a current bond price of $100 per bond
The bonds in both firms are risk free and they are zero-coupon bonds that will pay the holder principal and interest one year from today. The risk-free interest rate is 10%. An individual investor can also borrow or lend from a bank at the 10% risk-free rate.
Construct an arbitrage portfolio that includes exactly 100 shares of stock in firm X. How large are the arbitrage profits from this portfolio?
Perform vertical analysis on the income statements and balance sheet information for fiscal periods 2011 and 2010.
this case is intended to be an introduction to the various methods used in capital budgeting and looks at some of the
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Listen or review the slides on Health Insurance Exchanges. In general, what is the main difference in opinion of the House and the Senate? Whose viewpoint do you agree with? How do these viewpoints impact financial challenges facing health care le..
explore the capital budgeting techniques covered in the unit, NPV, PI, IRR, and Payback. Compare and contrast each of the techniques with an emphasis on comparative strengths and weaknesses
What are the ethical issues?
Prepare a schedule the intangible section of Lewiss balance sheet at December 31, 2011. Show supporting computations in good form.
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