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Your parents ask your advice on financing a new car purchase. Nissan has been running a national sales promotion that gives buyers of a new Maxima the choice of a $1,500 rebate or 4% APR financing for 60 months. In addition, the local Nissan dealer is offering 5.9% APR financing for 60 months on all car purchases through a local bank, which could be used if your parents decide to take the rebate and use it as an additional down payment on their Maxima. Your parents found a fully loaded Maxima 3.5 SL for a price of $31,000 and have $3,000 as a down payment. Should your parents take the $1,500 rebate with 5.9% APR financing or the 4% APR financing and no rebate? Show your work by using financial calculator to justify your decision. (Hint: compare monthly payments.Using financial calculator!!!)
Suppose the real risk-free rate is 2.50% and the future rate of inflation is expected to be constant at 4.10%. What rate of return would you expect on a 5-year Treasury security, assuming the pure expectations theory is valid? Disregard cross-product..
YGTB, Inc., currently has an EPS of $1.20 and an earnings growth rate of 5 percent. If the benchmark PE ratio is 17, what is the target share price five years from now? (Do not round intermediate calculations and round your answer to 2 decimal places..
The correct terms used in cost plus and fixed price contracts to compute final price are:
Jonkin & Co. is considering an increase it's debt. The firm's current D/A is 0.35 with a WACC of 12.90%. It is considering two possible new levels of debt. Issue bonds in an amount that will result in a new D/A of 0.45 with a WACC of 11.00%. Which wi..
A firm has total assets of $150 million, liabilities of $90 million, and a return on assets of 8%. What is the return on equity? A company’s stock is trading at $35 a share. The company has a P/E ratio of 16, and pays $0.30 in dividends per share. Wh..
A private equity fund is considering investing in a company, which wants to produce a new product. The variable cost per unit is estimated at $9.51, the sales price would be set at $19.45, and fixed costs are estimated at $1202.28. The private equity..
Newman manufacturing is considering a cash purchase of the stock of Grips Tool. During the year just completed, Grips earned $3.84 per share and paid cash dividends of $2.14 per share (D0= $2.14). Grips' earnings and dividends are expected to grow at..
A florist recently paid a dividend, D0, of $1.25. It expects to have nonconstant growth of 20% for 2 years followed by a constant rate of 9% thereafter. The company's required return is 19%. What is the firm's horizon, or continuing, value? What is t..
First Simple Bank pays 8.6 percent simple interest on its investment accounts. If First Complex Bank pays interest on its accounts compounded annually, what rate should the bank set if it wants to match First Simple Bank over an investment horizon of..
What is the importance of stock performance in attracting investment capital for companies? What guidelines should an investor use to make stock investment decisions? What should your investment objective include when selecting stocks? How do you pre..
The U. S. system of banking historically led to many more banks that were smaller in size and operated with few branches. Why did the U. S. banking system develop so differently from that of other countries? What factors have brought about a change i..
Analyze the pros and cons of the commonly used measures ( NPV, IRR, PI, MIRR, DPB) and come to a conclusion based on the literature that you surveyed as to which methods are theoretically correct and those popular. Emphasize real-world practices of c..
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