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AB bonds carry a 10% annual coupon, have a $1,000 face value and mature in 4 years. Bonds of equivalent risk yield 15%. Find the market value of AB bonds. AB is in financial difficulty and has asked its bondholders to accept the following deal. The firm would like to make the next two payments of half the scheduled amount, and make the last two payments of twice the scheduled amount. If this plan is implemented, what will be the new price of the bond?
Your new born child will be starting college in 18 years. You expect your child's college education to cost $24,930 per year, due at the beginning of each year. How much must you set aside at the end of each year for your child to attend four years o..
Chester's turnover rate for this year is 6.29%. This rate is projected to remain the same next year and no further downsizing will occur from automating. Chester plans to spend an additional $500 beyond the extra amount above the $1000 recruiting bas..
You borrow $50,000 5 year loan to make renovations to a house. The interest rate on this loan is 8% per year. The loan calls for equal monthly payments. What is the monthly payment on this loan?
Martin Inc. is considering the addition of a new line of organic fertilizer. It is expected that each application of fertilizer will sell for $15.50 and the variable operating cost per application will be $8.00. Total fixed operating costs are expect..
You are an investor in common stock, and you currently hold a well-diversified portfolio that has an expected return of 10%, a beta of 1.2, and a total value of $12,000. You plan to increase your portfolio by buying 1,000 shares of X at $15 a share. ..
Micro Tech Corporation is expanding rapidly and currently needs to retain all of its earnings; hence, it does not pay dividends. However, investors expect Micro tech to begin paying dividends, beginning with a dividend of $1.50 coming 3 years from to..
Hughes Co. is growing quickly. Dividends are expected to grow at a rate of 25 percent for the next three years, with the growth rate falling off to a constant 4 percent thereafter. If the required return is 10 percent and the company just paid a divi..
Tattered Books has a WACC of 13.6 percent and a cost of equity of 16.1 percent. What is the after-tax cost of debt if the debt-equity ratio is 0.40? (Hint: First find the weights of debt and equity using the debt-equity ratio and then plug them into ..
You have been asked by an investor to value a restaurant. Last year, the restaurant earned pretax operating income of $300,000. Income has grown 4% annually during the last 5 years, and it is expected to continue growing at that rate into the foresee..
Cayman’s Crafters is also considering issuing new shares of common stock. Their investment banker has advised them that it is a good time to sell and that the market’s required rate of return on similar securities is currently 8.5%. You will be recei..
You’re trying to determine whether to expand your business by building a new manufacturing plant. The plant has an installation cost of $11.2 million, which will be depreciated straight-line to zero over its four-year life. If the plant has projected..
Volbeat Corp. shows the following information on its 2015 income statement: sales = $403,000; costs = $305,000; other expenses = $7,900; depreciation expense = $18,200; What is the 2015 operating cash flow? What is the 2015 cash flow to stockholder..
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