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Currently has one bond issue outstanding. This bond pays a coupon rate of 10% ($100 p/yr) and matures in 5 years, and has a par value of $1,000. If you require a 14% rate of return. This bond pays a coupon rate of 10% ($100 per year) and matures in five years, and has a par value of $1,000. Suppose interest rates were to drop from 14% to 8% tomorrow. What percentage increase in value would occur for each bond due to the drop in interest rates? (Calculate the capital gain of each bond and express it as a percentage of the bond value obtained above.)
The present value of $1,000 received at the end of year 1, $1,200 received at the end of year 2, and $1,300 received at the end of year 3, assuming an opportunity cost of 7 percent, is _____. If a United States Savings bond can be purchased from $29...
The market portfolio contains more of the smallest stocks and less of the larger stocks. For the market portfolio, the investment in each security is proportional to its market capitalization. Market capitalization is the total market value of the ou..
Kyle Corporation is comparing two different capital structures, an all-equity plan (Plan I) and a levered plan (Plan II). Under Plan I, Kyle would have 790,000 shares of stock outstanding. Under Plan II, there would be 540,000 shares of stock outstan..
How purchase of the apple press might affect the company revenue goals - return on investment for new capital investments and the company uses a cost of capital of 8.
Jonstone Nurseries, Inc., incurred depreciation expenses of $31,300 last year. The sales were $212,000 and the addition to retained earnings was $18,405. The firm paid interest of $5,100 and dividends of $7,500. The tax rate is 34%. What is the amoun..
Common stock financing is often considered the safest form of financing, as the issuing firm is under no obligation to pay dividends. Owners of common shares assume this uncertainty in the hope of favorable returns. Debt financing, assuming reasonabl..
The effect of taxing demanders are the same as taxing suppliers. The demand for Pepsi is more elastic Than the demand for soda.
Bilbo Baggins wants to save money to meet three objectives. First, he would like to be able to retire 30 years from now with retirement income of $28,500 per month for 25 years, with the first payment received 30 years and 1 month from now. If he can..
The interest factor (IF) for the future value of an ordinary annuity is 4.641 at 10% for four years. If we wish to accumulate $8,000 by the end of four years, how much should the annual payments be?
Mario's Home Systems has sales of $2,720, costs of goods sold of $2,060, inventory of $484, and accounts receivable of $420. How many days, on average, does it take Mario's to sell its inventory?
Tinker bell has a capital structure of $60,000 in debt and $140,000 in equity. What is the firm's weighted cost of capital if the marginal pretax cost of debt is 12 percent, the firm's average pretax cost of debt outstanding is 8%, and the cost of eq..
Two years after the bonds were issued, the going rate of interest on similar bonds fell to 8 percent. At what price would the bonds sell and If you bought the bond on the issue date at the issue price and expected to hold it until it matures on Dec..
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