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The Volpe Limousine Company wants to purchase a car entertainment system for one of its automobiles. The entertainment system vendor has offered to finance the $2,000 purchase over one year in 12 installments, with a total of $200 in interest to be paid on the loan. Volpe's bank has offered to finance the purchase with an installment loan, where $155 in interest will be repaid and payments on the loan must be made quarterly. What are the effective interest rates on these loans? Which loan should they select?
A 2-year maturity bond with face value of $1,000 makes annual coupon payments of $106 and is selling at face value. What will be the rate of return on the bond if its yield to maturity at the end of the year
The project has an initial cost of $554--this is also the amount which can be depreciated using the following depreciation schedule: Year 1 is 33%, Year 2 is 45%, Year 3 is 15%, and Year 4 is 7%.
one of the advantages of leasing voiced in the past is that it kept its liabilities off the balance sheet, thus making it possible for a firm to obtain more leverage than it otherwise could have.
Use a properly labelled IS-LM graph to analyze and illustrate the effect and calculate the expected exchange rate for the end of the year.
The Patrick Company's year-end balance sheet is shown below. Its cost of common equity is 18%, its before-tax cost of debt is 9%, and its marginal tax rate is 40%. Assume that the firm's long-term debt sells at par value.
You are considering an investment scenario where stocks will return -5% in a recession, +15% in a normal economy and +25% in a boom economy. Bonds will return +14% in a recession, +8% in a normal economy and +4% in a boom.
One issue of these bonds, the 8 1/4 percent coupon bonds due in 1996, was selling at 109% of par value, or for approximately $1,090. Why would someone pay $1,090 for the bonds of a bankrupt firm?
you have a house under contract for $125,000 and are putting 20% down. You are deciding the best lender based on their interest rates and points. Assume that you will finance the house for 30 years.
A stock is currently quoted at 53 on NASDAQ. A Rights Offering has been declared with an exercise price of 48, and 4.92 rights are needed to buy a new share of stock.
A large networking company wants to incorporate your software into their systems and is offering to pay you $511,000 today, plus $511,000 at the end of each of the following six years for permission to do this.
What are mergers and acquisitions, why do companies merge and how can a merger occur
Suppose your company needs $15 million to build a new assembly line. Your target debt?equity ratio is .60. The flotation cost for new equity is 8 percent, but the flotation cost for debt is only 5 percent.
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