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Company C presently has access to floating interest rate funds at a margin of 1.0% over LIBOR. Its direct borrowing cost is 11% in the fixed-rate bond market. In contrast, company D has access to fixed-rate funds at 12.2% and floating-rate funds at LIBOR+1.7%. Which company is deemed more risky by the investors in the bond markets?
a. Company C
b. Company D
c. Can't tell from the information given.
"A Treasury bond futures contract settled at 97'16." Calculate the present value of one futures contract? Are current market interest rates higher or lower than the standardized rate on a futures contract? Explain.
What is capital investment analysis? Why are capital investments decisions so important to businesses?
After-tax Cost of Debt The Heuser Company's currently outstanding bonds have a 9% coupon and a 12% yield to maturity. Heuser believes it could issue new bonds at par that would provide a similar yield to maturity. If its marginal tax rate is 35%, wha..
Assume that the risk free rate of interest is 3%, the market risk premium is 5%, and that the Betas for Dell and General Mills are 1.2 and 0.8 respectively. According to the CAPM, what should be the required rate of return for these two stocks?
How to get the holding period return for a $980 selling security that purchased fiver years before at $798? Prove that this return overstates the annualized, compound return.
You receive a credit card application from Shady Banks Savings and Loan offering an introductory rate of .5 percent per year, compounded monthly for the first six months, increasing thereafter to 16.2 percent compounded monthly. Assume you transfer t..
A project is expected to generate earnings before interest, taxes, depreciation and amortization of $435,725. What is project’s expected operating cash flow?
An investor pays a price of $20 per ounce to buy a European call option on the December 2016 gold futures contract. The option has a strike price of $1200 per ounce. When the option expires in July, the December gold futures is trading at $1260 per o..
Identify and describe the four stages of the capital decision making process according to your textbook.
If the standard deviation of Euro percentage changes is 10% annualized, what is the appropriate standard deviation to use for assessing the risk on a 1-month investment? Next, assuming an expected percentage appreciation for Euro of 3% per year (0.25..
Explain “corporate core competency” and how does it factor into a potential growth project?
Assume that Pomo Limited, a US based firm, expects to receive S$800,000 in one year. The existing spot rate of the Singapore dollar is US$0.74. The one-year forward rate of the Singapore dollar is US$0.76. Calculate the forward contract hedge. Calcul..
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