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Five years ago, Highland, Inc. issued a corporate bond with an annual coupon of $7,000, paid at the rate of $3,500 every six months, and a maturity of 25 years. The par (face) value of the bond is $1,000,000. Recently, however, the company has run into some financial difficulty and has restructured its obligations. Today's coupon payment has already been paid, but the remaining coupon payments will be postponed until maturity. The postponed payments will accrue interest at an annual rate of 7.5% per year and will be paid as a lump sum amount at maturity along with the face value. The discount rate on the renegotiated bonds, now considered much riskier, has gone from 7.0% prior to the renegotiations to 14.5% per annum with the announcement of the restructuring. What is the price at which the new renegotiated bond should be selling today? Recall that the compounding interval is 6 months and the YTM, like all interest rates, is reported on an annualized basis.
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the firm manufactures a global positioning system gps that sells for 2000 with cost of goods sold hardware 30 and
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Choose a country (not the United States or Canada) that has not already been chosen by another learner and post your country choice in the discussion area. Then, identify some political and currency risks of that country and discuss why a U.S. compan..
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The cash flow of a firm, also referred to as cash flow from assets, must be equal to the cash flow to:
The Montana Hills Co. has expected earnings before interest and taxes of $8,100, an unlevered cost of capital of 11%, and debt with both a book and face value of $12,000. The debt has an annual 8% coupon. The tax rate is 34%. What is the value of the..
What is the operating leverage effect and what causes it? What are the potential benefits and negative consequences of high operating leverage?
Assume cost increases occur annually. Both clients will simultaneously enter care facilities at age 77, spend three years in assisted living and one year in nursing care, and die at age 81.
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