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1. Determine the annual financing cost of a 6-month (182 day) $20,000 discounted bank loan at a stated annual interest rate of 10 percent. Assume that no compensating balance is required.
2. Pyramid Products Company has a revolving credit agreement with its bank. The company can borrow up to $1 million under the agreement at an annual interest rate of 9 percent. Pyramid is required to maintain a 10 percent compensating balance on any funds borrowed under the agreement and to pay a 0.5 percent commitment fee on the unused portion of the credit line.
Assume that Pyramid has no funds in the account at the bank that can be used to meet the compensating balance requirement. Determine the annual financing cost of borrowing each of the following amounts under the credit agreement:a. $250,000
b. $500,000
c. $1,000,000
What are the differences between the indirect and direct methods of preparing the statement of cash flows? Do you agree with the FASB that the direct method is preferred? Why, or why not?
Sports Corp has 10.3 million shares of common stock outstanding, 5.3 million shares of preferred stock outstanding, and 1.3 million bonds. If the common shares are selling for $25.3 per share, the preferred share are selling for $12.8 per share, and ..
Economists expect the inflation rate to be 1.5 percent for the coming year and the following year, and then after Year 2 inflation will settle at a constant rate greater than 1.5 percent. The yield is the same on one-year bonds and two-year bonds; th..
A property is expected to have NOI of $100,000 during the first year. Using a 10 percent yield rate (YO) and a five-year holding period, estimate the value under the following assumptions: a. NOI will be level but the property value will increase by ..
Evaluate two types of deception one with which you agree and one with which you disagree. Provide an example and rationale for each type.
Catalina Bank (CB) currently pays a dividend of $2.75 per share. T-bills are paying a 1.45% return and the market is anticipated to earn 9.65% per year. AAS has a beta of 1.32 and retains 60% of their earnings every year. What is the cost of equity (..
Hickock Mining is evaluating when to open a gold mine. The mine has 44,000 ounces of gold left that can be mined, and mining operations will produce 5,500 ounces per year. The required return on the gold mine is 12 percent, and it will cost $33.5 mil..
Security F has an expected return of 10.9% and a standard deviation of 24% per year. Security G has an expected return of 18.1% and a standard deviation of 63% per year.
A 6.40 percent coupon bond with 28 years left to maturity can be called in nine years.- What is the yield to call of the bond?
A 10 year, 12% semiannual coupon bond with a par value of $1,000 may be called in 4 years at a call price of $1,060. The bond sells for $1,100. (Assume that the bond has just been issued), 1. What is the bonds yield to maturity? 2. What is the bonds ..
Krystal Magee invested $150,000 18 months ago. Currently, the investment is worth $179,422. Krystal knows the investment has paid interest every month, but she doesn't know what the yield on her investment is. Help Krystal. Compute both the annual pe..
Suppose Stark Ltd. just issued a dividend of $2.14 per share on its common stock. The company paid dividends of $1.80, $1.89, $1.96, and $2.07 per share in the last four years? If the stock currently sells for $60, what is your best estimate of the c..
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