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You are a treasurer of a company and are obliged to arrange for a debt payment of $1,000,000 2 years from now.
Assume annual compounding and annual coupon payment.
The term structure of interest rates is flat at r = 6%. In order to prepare for the debt you decide to invest in a portfolio of 2-year 6% coupon bond and 3-year 6% coupon bonds. Both bonds have a face value of $1000 per share. How many bonds of each type should you buy, not only to fund the obligation but also to insure against having to invest more in the future to make up for any shortfall if interest rates change?
Ngala LLC has 5,000 bonds outstanding which are currently priced at $1,200 each. The bonds pay a coupon of 7.6% (paid semiannually) and mature in 7 years. What is the firm’s weighted average cost of capital?
Assume that a new project will annually generate revenues of $1,900,000 and cash expenses (including both fixed and variable costs) $1,050,000, while increasing depreciation by $210,000 per year. In addition the firm’s tax rate is 36%. Calculate the ..
What are the conditions that affect the success or lack of success in cross border acquisitions by multinational corporations? Give an example
A "fallen angel" is a bond that has moved from?
You estimate that you will need $669 thousand in 30 years to buy some cybernetic body enhancements, including infrared vision, retractable claws, and expanded brain storage capacity. The first deposit will be made right now, the second 10 years from ..
The price of a 5-year semannual-coupon bond is $$131.5184. Its duration and convexity are 4.3476 and 20.5562, respectively. If interest rates go up by 1%, what will be the dollar change in the price of this bond using both duration and convexity to e..
Your firm is contemplating the purchase of a new $575,000 computer-based order entry system. The system will be depreciated straight-line to zero over its five-year life. It will be worth $59,000 at the end of that time. At what level of pretax cost ..
Two projects are considered for evaluation. Project A has a cost of $10000 and is expected to produce benefits of $3000 per year for five years. Project B costs $25000 and is expected to produce cash flows of $7500 per year for five years. Calculate ..
You are to price options on a futures contract. A binomial tree models the movements of the futures price. You are given the following information: -Each period is 6 months, h=6months, -Time to maturity of an option, Determine the difference between ..
Perform multiple regression with real financial data - estimate the Fama - French 3-factor model for a list of twenty stocks and interpret the regression output.
An increase in a firm's average collection period (average accounts receivable period) generally indicates that:
Suppose a firm’s business operations mirror movements in the economy as a whole very closely—that is, the firm’s asset beta is 1. Find the equity beta for this firm for debt–equity ratios of 0, 1.6, 6.2, and 25.
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