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A tresury bond that matures in 10 years has a yield of 6%. A 10 year corporate bond has a yield of 9%. Assume that the liquidity premium on the corporate bond is 0.5%. What is the default risk premium on the corporate bond? Show work please
Projected operating costs (other than depreciation) are 73% of sales for the new beverages. However, Coca-cola estimates that projected sales for other carbonated beverages will fall $5 million in 2016, $9 million in 2017, $7 million in 2018, and $4 ..
A Treasury bond that matures in 10 years has a yield of 5%. A 10-year corporate bond has a yield of 8%. Assume that the liquidity premium on the corporate bond is 0.4%. What is the default risk premium on the corporate bond?
Acquisition Analysis -mergers and acquisitions, Suppose you offer an exchange ratio such that, at current preannouncement share prices for both firms, the offer represents a 20% premium to buy TargetCo. What will your earnings per share be after the ..
In some instances, when a depository institution borrower cannot make the promised principal and interest payment on a loan, the bank will extend another loan for the customer to make the payment. a. Is the first loan classified as a nonperforming lo..
A bank has decided it must raise external capital. Discuss the advantages and disadvantages of each of the following choices: a. Subordinated debt at 7.7 percent b. Preferred stock at a 10 percent dividend yield c. Common stock
A bank has two, 3-year commercial loans with a present value of $70 million. The first is a $30 million loan that requires a single payment of $37.8 million in 3 years, with no other payments until then. What is the duration of the bank’s commercial ..
The Board of Directors of BesTaste, a medium size company, wants catering business that has been growing over the past six years. The local authority has permission to extend its current premises. The company granted the business assets. Explain whic..
Assume you are the manager of a routine 30-bed medial unit in an acute care hospital. The total fixed costs of your unit are $500,000 per year. The variable costs of your unit are approximately $100 per day, at the typical level of patient acuity gen..
Briefly but carefully distinguish between Stand-alone risk, diversifiable risk, and market risk. Of the three measures, which one is most relevant for stock valuation? Why?
Martell Mining Company's ore reserves are being depleted, so its sales are falling. Also, because its pit is getting deeper each year, its costs are rising. As a result, the company's earnings and dividends are declining at the constant rate of 7% pe..
Night Shades Inc. (NSI) manufactures biotech sunglasses. The variable materials cost is $18.30 per unit, and the variable labor cost is $6.20 per unit. What is the variable cost per unit? Suppose NSI incurs fixed costs of $640,000 during a year in wh..
An electric utility is considering a new power plant in northern Arizona. Power from the plant would be sold in the Phoenix area, where it is badly needed. Because the firm has received a permit, the plant would be legal; Calculate the NPV and IRR wi..
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