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Yonge Corporation must arrange financing for its working capital requirements for the coming year. Yonge can: (a) borrow from its bank on a simple interest basis (interest payable at the end of the loan) for 1 year at a 12% nominal rate; (b) borrow on a 3-month, but renewable, loan basis at an 11.5% nominal rate; (c) borrow on an instalment loan basis at a 6% add-on rate with 12 end-of-month payments; or (d) obtain the needed funds by no longer taking discounts and thus increasing its accounts payable. Yonge buys on terms of 1/15, net 60. What is the effective annual cost of the least expensive type of credit?
You purchased a zero coupon bond one year ago for $138.23. The market interest rate is now 7 percent. If the bond had 28 years to maturity when you originally purchased it, what was your total return for the past year? Assume semi-annual compounding.
What is the difference between periodic and perpetual inventory tracking? Are there cases where a health care organization could use both methods of inventory costing for different types of inventory, and if so, please explain why they would do this.
The demand for 1,000 units of a part to be used at a uniform rate throughout the year may be met by manufacturing. The part can be produced at the rate of 3 per hour in a department that works 1,880 hours per year. The set-up cost per lot is estimate..
You own a stock portfolio invested 25 percent in Stock Q, 30 percent in Stock R, 30 percent in Stock S, and 15 percent in Stock T. The betas for these four stocks are .75, 1.13, 1.14, and 1.31, respectively. What is the portfolio beta? (Do not round ..
Celine Co. will need 500,000 in 90 days to pay for German imports. Today's 90-day forward rate of the euro is $1.07. There is a 40 percent chance that the spot rate of the euro in 90 days will be $1.02, and a 60 percent chance that the spot rate of t..
Assume that the risk-free rate is 8 percent, the required rate of return on the market (or an average-risk stock) is 13 percent, and the required rate of return on Acme Healthcare stock is 15 percent. What is the implied beta coefficient of the stock..
How can options sell for more than their exercise value and whats wrong with using payback period? What should we use instead? Why?
Pricing objectives and pricing methods in the services sector
The Sharpe Co. just paid a dividend of $2.05 per share of stock. Its target payout ratio is 40 percent. The company expects to have earnings per share of $6.20 one year from now. If the adjustment rate is .3 as defend in the Lintner model, what is th..
A company issues a common stock to the public for $35.00. The expected dividend and growth in dividends are $2.08 per share and 6.60%, respectively. If the flotation cost is 13.60% of the issue's gross proceeds, what is the cost of external equity, r..
What is the present value of purchasing the car? What is the present value of leasing the car? What break-even resale price in four years would make you indifferent between buying and leasing?
Suppose we are told that an investor invests optimally and that he puts 20% in the Market portfolio and 80% in the Risk Free Portfolio. What must be his coefficient of risk aversion?
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