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1. Please explain business debt interest deductibility? How can it help?
2. A non-dividend-paying stock has a futures contract with a price of $69.2 and a maturity of two months. If the risk-free rate is 3.4 percent, what is the price of the stock?
3. Suppose the 180-day S&P 500 futures price is 1,166.1, while the cash price is 1,151.32. What is the implied dividend yield on the S&P 500 if the risk-free interest rate is 3.2 percent?
A commercial bank has $200 million of floating rate loans yielding the T-bill rate plus 2%. These loans are financed by $200 million of fixed-rate deposits costing 9%. A savings association has $200 million of mortgages with a fixed rate of 13%. What..
Nova Products has a 4 year maximum acceptable payback period. The firm is considering the purchase of a new machine and must choose between two alternatives. Determine the payback period for each machine? Comment on the acceptability of the? machines..
Fairfax Pizza sells pizza in Northern Virginia and is evaluating the stadium project, which would involve selling pizza in the baseball stadium for 2 years, starting today. Based on the following information, what is the net present value of the stad..
O'Brien Ltd.'s outstanding bonds have a $1,000 par value, and they mature in 25 years. Their nominal yield to maturity is 9.25%, they pay interest semi annually, and they sell at a price of $975. What is the bond's nominal coupon interest rate?
The Saunders Investment Bank has the following financing outstanding. Debt: 60,000 bonds with a coupon rate of 6 percent and a current price quote of 109.5; the bonds have 20 years to maturity. 230,000 zero coupon bonds with a price quote of 17.5 and..
Identify whether you should use an average cost of bank funds or a marginal cost of funds in the following situations. a. Setting the rate on a new loan b. Evaluating the profitability of a long standing customer's relationship c. Calculating the ban..
Start with the partial model in the file Ch18 P08 Build a Model.xls on the textbook’s Web site. Schumann Shoe Manufacturer is considering whether or not to refund a $70 million, 10% coupon, 30-year bond issue that was sold 8 years ago. Conduct a comp..
South Shore Limited has 21,000 shares of stock outstanding with a par value of $1 per share and a market price of $7.50 a share. The firm just announced a 5-for-2 stock split. What will the par value of the stock be after the split?
Calculate the theoretical value of the forward contract. Compare and comment and calculate the value of the option by using the BlackOScholes formula.
The Spinnaker Company has paid an annual dividend of $2.20 per share for some time. Recently, the board of directors voted to grow the dividend by 6.5% per year from now on. What is the most you would be willing to pay for a share of Spinnaker if you..
Far Side Corporation is expected to pay the following dividends over the next four years: $12, $8, $4, and $1. Afterward, the company pledges to maintain a constant 7 percent growth rate in dividends forever. Required: If the required return on the s..
The company has offered you a $5,000 bonus, which you may receive today, or 100 shares of the company’s stock, which has a current stock price of $50 per share. Mathematically, what is the best choice? Why?
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