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The Sunbelt Corporation has $37 million of bonds outstanding that were issued at a coupon rate of 11.475 percent seven years ago. Interest rates have fallen to 10.75 percent. Mr. Heath, the Vice-President of Finance, does not expect rates to fall any further. The bonds have 18 years left to maturity, and Mr. Heath would like to refund the bonds with a new issue of equal amount also having 18 years to maturity. The Sunbelt Corporation has a tax rate of 36 percent. The underwriting cost on the old issue was 2.4 percent of the total bond value. The underwriting cost on the new issue will be 1.3 percent of the total bond value. The original bond indenture contained a five-year protection against a call, with a call premium of 7 percent starting in the sixth year and scheduled to decline by one-half percent each year thereafter (consider the bond to be seven years old for purposes of computing the premium). Use Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods. Assume the discount rate is equal to the aftertax cost of new debt rounded up to the nearest whole percent (e.g. 4.06 percent should be rounded up to 5 percent).
a. Compute the discount rate. (Do not round intermediate calculations. Input your answer as a percent rounded up to the nearest whole percent.)
b. Calculate the present value of total outflows.
Darlene wants to accumulate $50,000 by the end of ten years by making Equal year end-of-the year deposits over the next ten years.
What will be the purpose of your new code? Is it to regulate behaviour and a code of ethics should be tailored to the needs and values of your organization.
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what is the probability that we get our license and the casino will be commercially viable?
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Canvas Reproductions has fixed operating cost of $12,500, variable operating costs of $10 per unit and it sells paintings for $25 each.
Returns for the Shields Corporation over the last three years are shown below. Calculate the standard deviation of Shields' returns?
Grandma's Applesauce, Corporation has a .60 probility of a good year with operating cash flow of $50,000; & 0.40 probability of bad year with operating cash flow of $30,000.
The rate of return on the common stock of Flowers by Flo is expected to be 14 percent in a boom economy, 8 percent in a normal economy, and only 2 percent in a recessionary economy.
Do you think the percentage of sales method may be more or less accurate in predicting the company's likely balance sheet?
Myers Business Systems is estimating the introduction of a new product. The possible levels of unit sales and the probabilities of their occurrence are given below:
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