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You have been hired to value a new 10-year callable, convertible bond. The bond has a 5.6 per cent coupon rate, payable annually. The conversion price is $150, and the equity currently sells for $44.75. The share price is expected to grow at 8 per cent per year. The bond is callable at $1,100 but based on prior experience it will not be called unless the conversion value is $1,200. The required return on this bond is 6 per cent. What value would you assign to this bond?
A 13-year annuity pays $2,800 per month, and payments are made at the end of each month. The interest rate is 12 percent compounded monthly for the first seven years, and 10 percent compounded monthly thereafter. What is the present value of the annu..
Mikkelson Corporation's stock had a required return of 11.75% last year, when the risk-free rate was 5.50% and the market risk premium was 4.75%. Then an increase in investor risk aversion caused the market risk premium to rise by 2%. The risk-free r..
At the end of its third year of? operations, the Sandifer Manufacturing Co. had $ 4 comma 596 comma 000 $4,596,000 in? revenues, $ 3 comma 390 comma 000 $3,390,000 in cost of goods? sold, $ 445 comma 000 $445,000 in operating expenses which included ..
Suppose the U.S. Treasury announces plans to issue $50 billion of new bonds. Assuming the announcement was not expected, what effect, other things held constant, would that have on bond prices and interest rates?
A stock has had returns of −19.1 percent, 29.1 percent, 25.2 percent, −10.2 percent, 34.9 percent, and 27.1 percent over the last six years. What are the arithmetic and geometric returns for the stock?
(Annuity payments) Mr. Bill S. Preston, Esq. purchased a new house for $90,000. He paid $30,000 upfront and agreed to pay the rest over the next 20 years in 20 equal annual payments that include principal payments plus 11 percent compound interest on..
Determine the composition of the exiting liquid stream; the ratio of the actual Ls/Gs is larger than the minimum Ls/Gs.
The preferred stock of Dallas Platinum Exchange has a par value of $65.00 and pays a 7.25% dividend rate per year. You calculated a beta of 1.05 for the stock. The risk-free rate is 2.7% and the market return is 9.2%. Assuming that CAPM holds, what i..
An investment project will have an initial, after-tax cash outlay of $50,000 an after-tax cash inflows of $7,190 per year for 10 years. In addition, it will have an after-tax salvage value of $10,000 at the end of Year 10. The risk-free rate is 6%, t..
The Operating Budget-Describe how you would perform a Cost Analysis. (Title this section Cost Analysis)
Write a simple explanation of the differences between: 1- Long Call 2- Short Call 3- Long Put 4- Short Put.
You purchased 1000 shares of stock in Cumberland Software for $3 per share on January 1, 2006. Over the next four years you received 7 cents per share annually in dividends. On December 31, 2009 you sell all your shares of Cumberland Software for $16..
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