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Impact of Capital Flows:
Assume that stocks in the United Kingdom become very attractive to U.S. investors. How could this affect the value of the British pound? Explain.
Your firm has annual sales of 11 million. Cost of goods sold represent 85 percent of this value and purchases are 80 percent of cost of goods sold. Your firm has an AAI (Average Age of Inventory) of 60 days, an APP (Average Payment Period) of 25 days..
Bond X pays an 8% annual coupon and Bond Y pays a 4% annual coupon. Both bonds have 10 years to maturity. The yield to maturity for bod bonds is now 8%. Which bond has more interest rate risk? Why? If the interest rate suddenly rises by 2%. By what p..
Assume the US exports 1,000 computers at a price of $3,000 each and imports 150 UK autos at a price of 10,000 pounds each. Assume that the dollar/pound exchange rate is $2 per pound. Calculate in dollar terms, the US export receipts, import payments ..
a three year $1,000 par bond has a coupon rate of 6% convertible semiannually. It is sold at a yield of 7% convertible semiannually. Find a) the price of the bond. b) the amount of discount. c) the negative amortization of discount in period 5.
Estes Park Corp. pays a constant $1.7 dividend on its stock. The company will maintain this dividend for the next 17 years and will then cease paying dividends forever. If the required return on this stock is 2.34 percent, what is the current share p..
A share of stock is now selling for $105. It will pay a dividend of $7 per share at the end of the year. Its beta is 1. What do investors expect the stock to sell for at the end of the year? Assume the risk-free rate is 7% and the expected rate of re..
Dayman Inc. has asked you to evaluate a proposal to buy a new costume machine. The base price is $110,000, and shipping and installation costs would add another $15,000. The machine falls into the MACRS 3-year class, and it would be sold after anothe..
Hostile acquisitions create real animosities between the stockholders of the acquired and acquiring companies. Comment on the truth of this statement.
McKenna Sports Authority is getting ready to produce a new line of gold clubs by investing $1.85 million. The investment will result in additional cash flows of $525,000, $817,500, and $1,200,000 over the next three years. What is the payback period ..
The Firm, Inc. has an after- tax cost of capital of 12%, and its tax rate is 40%. Last year the firm had $3,400,000 of earnings before interest and taxes on its $12,000,000 of sales, while depreciation expense was $800,000, and interest expense $200,..
If a corporate bond with a face value of $1,000 has 24 years to go until it matures, has a coupon interest rate of 5.7% and a market price of $1,223.92, what is its current yield?
The D.J. Masson Corporation needs to raise $700,000 for 1 year to supply working capital to a new store. Masson buys from its suppliers on terms of 3/10, net 90, and it currently pays on the 10th day and takes discounts. However, it could forgo disco..
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