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Company X has a $ 100 million, 2 year, % fixed rate semi-annual pay debt. Payments are actual count over a 360-day year. The company expects interest rates to fall and would prefer to have a floating rate debt. Company Y has a $100 million, two year, floating rate semi-annual pay debt at LIBOR plus 100 basis points. Payments are actual day count over a 360-day year. The company expects interest rates to rise and would like to use a swap to convert the debt to fixed rate. A $100 million, two year 5.5% semi-annual pay swap versus LIBOR plus 125 basis points is available to both X and Y. Demonstrate how each the two can use this swap to achieve its objectives.
A firm must raise $100million, all of which will be used to construct a new plant. It is debating the sale of first mortgage bonds or debentures. If it decides to issue $50million of each type, as opposed to $75 million of first mortgage bonds and $2..
A manufacturer is sourcing a component for a new product. Expected monthly demand is 705 units. The component can be purchased from either supplier A or supplier B, with the following price breaks: What order quantity is optimal if the objective is t..
Consider an asset that costs $873,900 and is depreciated straight-line to zero over its nine-year tax life. The asset is to be used in a six-year project; at the end of the project, the asset can be sold for $136,300.
A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long-term government and corporate bond fund, and the third is a T-bill money market fund that yields a sure rate of 4.9%. The correlation between th..
Organizational culture is considered a product and a process. Discuss organizational culture as a product and a process. Which concept do you favor and why?
How many years does it take for an annuity to reach three-quarters the value of a perpetuity if the interest rate is 5%?
An company buys a color printer that will cost $18,000 to buy, and last 5 years. It is assumed that it will require servicing costing $500 each year. What is the equivalent annual annuity of this deal, given a cost of capital of 12%?
At year-end 2013, Wallace Landscaping’s total assets were $1.8 million and its accounts payable were $450,000. Sales, which in 2013 were $2.1 million, are expected to increase by 20% in 2014. Total assets and accounts payable are proportional to sale..
The Retarded Company’s dividends are declining at an annual rate of 6 percent. The company just paid a dividend of $4 per share. You require a 16 percent rate of return. How much will you pay for this stock? The last dividend on Riverhawk Corporation..
Your niece just started her college career with a major in economics. She is curious as to the interrelationship between the success of an economy and the financial markets, concepts, and financial institutions. What are the financial markets and w..
Charlie Stone wants to retire in 35 years(he is currently 22) and be able to withdraw $250,000 per year for 15 years. Charlie wants to receive the first payment at the end of the 35th year. Using annual interest rate of 10%, how much should Charlie d..
On Dec 31 an investor longs 18 contracts of Gold with a settlement price of 1185.40. What is the investors overall profit/loss? The contract size is 100 troy oz
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