a. Spratt Company purchased Treasury bond futures contracts when the quoted price was 93-50. When this position was closed out, the quoted price was 94-75. Determine the profit or loss per contract, ignoring transaction costs.

b. Suerth Investments, Inc., purchased Treasury bond futures contracts when the quoted price was 95-00. When this position was closed out, the quoted price was 93-60. Determine the profit or loss per contract, ignoring transaction costs.

c. Marks Insurance Company sold S&P 500 stock index futures that specified an index of 1690.When the position was closed out, the index specified by the futures contract was 1,720. Determine the profit or loss, ignoring transaction costs.

Difference in ebit-taxable income must be interest expense : find the pretax income. The difference between EBIT and taxable income must be interest expense. |

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Determine the profit or loss per contract-transaction costs : When this position was closed out, the quoted price was 94-75. Determine the profit or loss per contract, ignoring transaction costs. |

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Compute the yield to maturity on old issue : Russell Container Corporation has $1,000 par value bond outstanding with 30 years to maturity. Compute the yield to maturity on the old issue. |

## Estimates its total variable manufacturing costsX Company manufactures a single product and estimates its total variable manufacturing costs each month. Each unit of product requires 2.1 pounds of direct material, and the price per pound is $21.00. It takes one hour of direct labor time to manufac.. |

## Compute the eac for both machinesYou are evaluating two different silicon wafer milling machines. The Techron I costs $261,000, has a three-year life, and has pretax operating costs of $70,000 per year. use straight-line depreciation to zero over the project’s life and assume a salv.. |

## What is current price of the bondEven though most corporate bonds in the United States make coupon payments semiannually, bonds issued elsewhere often have annual coupon payments. Suppose a German company issues a bond with a par value of €1,000, 15 years to maturity, and a coupon r.. |

## Calculate the dividend expected to be paid eight yearsCalculate the dividend expected to be paid 8 years from today. |

## An investor requires a return of risky securityAn investor requires a return of 12 percent of risky securities |

## What is the total value of icarusIcarus Airlines is proposing to go public, and you have been given the task of estimating the value of its equity. Management plans to maintain debt at 22% of the company’s present value, and you believe that at this capital structure the company’s d.. |

## Explain why bond investors are subject to interest rate riskBond investors are subject to two (2) principal types of risk: (1) interest rate risk and (2) default risk. Explain why bond investors are subject to interest rate risk. Discuss the concept of default risk and how the “default risk premium” (for a co.. |

## Likely ex-rights price assuming all rights are exercisedThe Buppence Company is making a rights issue at an issue price of $10 for one new share for every four shares currently held. If the stock price before the issue was $15, what is the likely ex-rights price assuming all rights are exercised? |

## What is maximum cost the company would be willing to payHankins, Inc., is considering a project that will result in initial aftertax cash savings of $6.5 million at the end of the first year, and these savings will grow at a rate of 3 percent per year indefinitely. What is the maximum cost the company wou.. |

## Preferred stock outstandingA corporation has $5,000,000 of 10 percent bonds and $3,000,000 of 12 percent preferred stock outstanding. The firm’s financial breakeven (assuming a 40 percent tax rate) is |

## Calculate an estimate of the percent price changeA 6.8% coupon bearing bond that pays interest semi-annually has a yield to maturity of 4.5% per year. This bond has a duration of 17.3 years and a convexity of 113. If the market yield increases 35 basis points, calculate an estimate of the percent p.. |

## System pays no dividends-estimate market capitalizationSuppose Cisco System pays no dividends but spent $5 billion on share repurchases last year. If Cisco’s equity cost of capital is 12%, and if the amount spent on repurchases is expected to grow by 8% per year, estimate Cisco’s market capitalization. I.. |

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