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Suppose a firm plans to borrow $5 million in 180 days. The loan will be taken out at whatever LIBOR is on the day the loan begins and will be repaid in one lump sum, 90 days later. The firm would like to lock in the rate it pays so it enters into a forward rate agreement with its bank. The bank agrees to lock in a rate of 12 percent.
Determine the annualized cost of the loan for each of the following outcomes. Interest is based on 90 days and a 360-day year.
a. LIBOR in 180 days is 14 percent.
b. LIBOR in 180 days is 8 percent.
Suppose you bought a 13 percent coupon bond one year ago for $1,050. The bond sells for $1,085 today. Assuming a $1,000 face value, what was your total dollar return on this investment over the past year? What was your total nominal rate of return o..
What is no hard no fast rules. What is the necessary of operating expenses? The power of depreciation and amortization? What is the one time charge?
Janicek Corp. is experiencing rapid growth. Dividends are expected to grow at 28 percent per year during the next three years, 18 percent over the following year, and then 5 percent per year indefinitely. The required return on this stock is 11 perce..
Given this economic background...Compose a 2-4 page report, single-spaced, on the following topic: If the Fed decides to raise interest rates next year, what effect would rising rates have upon the following:
Katherine wishes to endow a professorship in honor of her beloved mycology professor. The University's development office has prepared a proposal for her review, to wit, "The Agnew Chair in Fungus Studies," which will contribute $1 million per year, ..
Mur Corps bonds mature in 8 years, with a par value of $1,000, and an annual coupon rate of 6.5% The market requires an interest rate of 8.2% on these bonds. What is the bond's price?
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Rogue Industries reported the following items for the current year: Sales = $3,000,000; Cost of Goods Sold = $1,500,000; Depreciation Expense = $170,000; Administrative Expenses = $150,000; Interest Expense = $30,000; Marketing Expenses = $80,000; an..
You are planning to purchase the stock of Ted's Sheds Inc. and you expect it to pay a dividend of $3 in 1 year, $4.25 in 2 years, and $6.00 in 3 years. You expect to sell the stock for $100 in 3 years. If your required return for purchasing the stock..
Joe has a son and a wife. His wife is not the mother of his son. He wants to write his will so that they will be treated equitably. The son is currently 10 years old. In his will, Joe provides that $100,000 will be used to invest at the then-current ..
Alcott's preferred stock pays a dividend of $1.00 per quarter. If the price of the stock is $55.00, what is its nominal (not effective) annual rate of return?
Niko has purchased a brand new machine to produce its High Flight line of shoes. The machine has an economic life of five years. The depreciation schedule for the machine is straight-line with no salvage value. What is the financial break-even point?
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