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Assume Stratton Health Clubs, Inc., has $3,000,000 in assets. If it goes with a low liquidity plan for the assets, it can earn a return of 20 percent, but with a high liquidity plan, the return will be 13 percent. If the firm goes with a short-term financing plan, the financing costs on the $3,000,000 will be 10 percent, and with a long-term financing plan, the financing costs on the $3,000,000 will be 12 percent.
a. Computer the anticipated return after financing costs with the most aggressive asset-financing mix.b. Computer the anticipated return after financing costs with the most conservative asset-financing mix.c. Compute the anticipated return after financing costs with the two moderate approaches to the asset-financing mix.d. Would you necessarily accept the plan with the highest return after financing costs? Briefly explain.
Assuming that interest rates in the economy are expected to remain at their current level, what is the best estimate of the nominal interest rate on new bonds? Round your answer to two decimal places.
If 8% is reasonable discount rate, which option is less costly? what discount rate would cause the two alternatives to have the same cost in the present value terms. Please show work.
Jackie has a margin account with a balance of $45,000. If initial margin requirements are 50% and Turtle Industries is currently selling at $50 each share:
Do two 7-year depreciation schedules for an equipment purchase of $68,000. The salvage value at the end of the 7 years is $5,000. The first schedule should be a straight line schedule.
Explain Capital budgeting involves calculation of net present value and is considering the development of one of two mutually exclusive new computer models
Assuming interest rates decline substantially (i.e., they decline to 4 percent), discuss what will happen to the bond's call-adjusted duration and the reason for the change.
X-1 Corp's total assets at the end of last year were $380,000 and its EBIT was 52,500. What was its basic earning power (BEP) ratio?
Suco co needs $800,000 to develop a plant. It issues a $1,000 par value bond with a coupon rate of 12 percent and 15 years maturity. The investors rate of return of 12 percent.
Suppose that many European countries that use the euro as their currency experience higher inflation than the US, while 2 other European countries that use the euro as their currency experience lower inflation than US.
Select a company and determine the costs of its various types of capital: Long Term debt, Preferred Stock and Common Stock. What is the WACC of your selected company?
Grossnickle Company issued a twenty year, non-callable, 6.3% annual coupon bonds at their par value of $1,000 one year ago. Today, the market interest rate on these bonds is 5.5 percent.
Choose three terms which are most relevant in investment process and describe what they are and why they are relevant.
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