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Which of the following statements is CORRECT?
a. Commercial paper is typically offered at a long-term maturity of at least five years.
b. Trade credit is provided only to relatively large, strong firms.
c. Commercial paper can be issued by virtually any firm so long as it is willing to pay the going interest rate.
d. Short-term debt is favored by firms because, while it is generally more expensive than long-term debt, it exposes the borrowing firm to less risk than long-term debt.
e. Commercial paper is a form of short-term financing that is primarily used by large, strong, financially stable companies.
You need to accumulate $10,000. To do so, you plan to make deposits of $1,250 per year, with the first payment being made a year from today, in a bank account that pays 12 percent interest, compounded annually. Your last deposit will be less than $1,..
Curran Contracting is issuing new 25-year bonds that have warrants attached. If not for the attached warrants, the bonds would carry an 11% annual interest rate. However, with the warrants attached the bonds will pay an 8% annual coupon. There are 30..
If a company's cost of capital is too high, how does using more debt in their capital structure instead of equity reduce that cost? What are the disadvantages of using too much debt
Molteni Motors Inc. recently reported $8 million of net income. Its EBIT was $15 million, and its tax rate was 36%. What was its interest expense?
In a perfect world and in the absence of externalities, should you take only the projects with the highest NPV? - Which are economy-wide inputs, and which are project specific inputs?
Value of Operations of Constant Growth Firm EMC Corporation has never paid a dividend. Its current free cash flow of $520,000 is expected to grow at a constant rate of 4.2%. The weighted average cost of capital is WACC = 10.5%. Calculate EMC's estima..
Mississippi River Shipyards is considering the replacement of an 8-year-old riveting machine with a new one that will increase earnings before depreciation from $30,000 to $54,000 per year. The new machine will cost $90,000, and it will have an estim..
Ethier Enterprise has an unlevered beta of 1.05. Ethier is financed with 45% debt and has a levered beta of 1.45. If the risk free rate is 4.5% and the market risk premium is 7%, how much is the additional premium that Ethier's shareholders require t..
A company recently paid a $1.05 dividend. The dividend is expected to grow at a 16.1 percent rate. At a current stock price of $71.75, what return are shareholders expecting?
Orange Computers Inc issued 8% coupon bonds, with 7 years to maturity that make annual payments. what is the current yield?
Mary and Carlos want to buy a $400,000 house. They have $50,000 for a down payment. Their lender is offering them a 30 year mortgage at 6.2%. What is their total mortgage payment (principal & interest + escrow)?
A project has an initial cost of $42,000 and a four-year life. The company uses straight-line depreciation to a book value of zero over the life of the project. The projected net income from the project is $1,400, $3,600, $4,000, and $4,500 a year fo..
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