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A company must pay liabilities of $1,000 due 6 months from now and $2,000 due one year from now. The only investments available to the company are two bonds. Bond A is a 6-month bond with 8% nominal annual coupon rate convertible semiannually and a 6% nominal annual yield rate convertible semiannually. Bond B is a 1-year bond with 5% nominal annual coupon rate convertible semiannually and a 7% nominal annual yield rate convertible semiannually. Determine the cost to the company now to match its liabilities exactly.
Veggie Burgers, Inc., would like to maintain its cash account at a minimum level of $264,000 but expects the standard deviation in net daily cash flows to be $13,900, the effective annual rate on marketable securities to be 3.8 percent per year, and ..
An asset used in a four-year project falls in the five-year MACRS class for tax purposes. The asset has an acquisition cost of $6,180,000 and will be sold for $1,380,000 at the end of the project. If the tax rate is 34 percent, what is the aftertax s..
You want to have $2 million in real dollars in an account when you retire in 40 years. The nominal return on your investment is 10 percent and the inflation rate is 3.8 percent. What real amount must you deposit each year to achieve your goal?
A piece of newly purchased industrial equipment costs $968,000 and is classified as seven-year property under MACRS. The MACRS depreciation schedule is shown in Table 10.7. Calculate the annual depreciation allowances and end-of-the-year book values ..
A hedge fund portfolio manager has two investments in her portfolio. She has different amounts invested in these two investments. The details are as follows: A – Standard deviation of 10%, $1,000,000 B – Standard deviation of 6%, $2,700,000. A and B'..
Find the present value of the following cash flows using an interest rate of 7% per year: twenty annual cash flows of $600 each, occurring at the end of each year with the first cash flow one year from today, plus a one-time cash flow of $6,000 occur..
If you believe that investors require a 20 percent rate of return on a stock of this risk, what price would you recommend as the IPO price for Konawalski?
What is meant by fundamental analysis?- How does fundamental analysis differ from technical analysis.
Alexandria's Dance Studio is currently an all-equity firm with earnings before interest and taxes of $338,000 and a cost of equity of 14.2 percent. The tax rate is 34 percent. Alexandria is considering adding $400,000 of debt with a coupon rate of 7 ..
What are some other methods to take advantage of potential arbitrage opportunities in the U.S. Treasury market? Are there ways with derivatives that investors can take advantage of potential arbitrage opportunities?
An all-equity business has 100 million shares outstanding selling for $20 a share. Managment bhelieves that interest rates are unreasonably low and decide to execute a leverage recapitalization. What is the market value of the firm prior to the recap..
Value Lodges owns an economy motel chain and is considering building a new 200-unit motel. The cost to build the motel is estimated at $8,040,000; Value Lodges estimates furnishing for the motel will cost an additional $720,000 and will require repla..
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