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Jan Volk, financial manager of Green Sea Transport(GST), has been asked by her boss to review GST's outstanding debt issues for possible bond refunding. Five years ago, GST issued $40,000,000 of 11%, 25 year debt. The issue, with semiannual coupons, is currently callable at a premium of 11%, or $110 for each $1,000 par value bond. Flotation costs on this issue were 6%, or $2,4000,000.
Volk believes tha GST could issue 20-year debt today with a coupon rate of 8%. The firm has placed many issues in the capital markets during the last 10 years, and its debt flotation costs are currently estimated to be 4% of the issue's value. GST's federal-plus-stae tax rate is 40%.
What is the toatl dollar call premium required to call the old issue? Is the tax deductible? What is the net after-tax cost of the call?
Calculate the investor's dollar-weighted average return for this five-year period.
Discuss and explain the concept of incremental cash flow. Why is this important to distinguish from other cash flows?
Investors expect the average annual future return on the market to be 9.50%. Using the SML, what is Colonial Bancshare 's required rate of return?
On September 30, 2000, Mattel®, a major toy manufacturer, virtually gave away The Learning Company®, a maker of software for toys, to rid itself of a disastrous acquisition of software publishing firm which actually had cost the firm hundreds of m..
Payment of 9559 is due to software developers. How much does A owe B ?
If the receivable turnover ration is 4 to 1, and no other asset buildup is needed to serve the new customers, what will Johnson's incremental return on new average investment be?
Your portfolio has a beta of 1.78. The portfolio consists of 18 percent U.S. Treasury bills, 32 percent stock A, and 50 percent stock B. Stock A has a risk level equivalent to that of the overall market. What is the beta of stock B?
Assume that the firm has a tax rate of 35 percent. Compute the cash flows to investors from operating activity.
Robin sold 800 shares of a non-dividend paying stock this morning for a total of $29,440. She had buy these shares on margin twelve months ago at cost per share of $35.
Using the required rate of return calculated in part (a) and the Discounted Cash Flow Model, compute the intrinsic value of a share of Hewlett-Packard Stock. What assumptions, if any, was it necessary to make?
To accumulate $8,000 by the end of 5 years by making equal annual end-of-year deposits for next five years. If earning 7 percent on the investments, how much must be deposited at the end of each year to meet the goal?
If we are bidding on a 13 weeks Treasury bill with a 1% return and a 26 weeks Treasury bill with a 2% return for a $1,000 T-bill, how much would we be willing to bid on the Treasury bills?
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