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Duke Energy has recently issued a bond with the following characteristics: maturity: 20 years, coupon rate: 6% (paid semi-annually), face value: $1000. Your investment advisor has told you that the yield-to-maturity on this bond is 7.5%. What should be the price of this bond?
Digital Organics (DO) has the opportunity to invest $0.98 million now (t = 0) and expects after-tax returns of $580,000 in t = 1 and $680,000 in t = 2. The project will last for two years only. The appropriate cost of capital is 14% with all-equity f..
Find the present value of a three-year, $20,000 ordinary annuity deposited into an account that pays 12 percent annual interest, compounded monthly.
Mars Inc. recently borrowed $220,000 from its bank at a simple interest rate of 11 percent. The loan is for nine months and, according to the loan agreement, the interest should be added to the amount borrowed and the total amount to be repaid in mon..
If the 15-year Treasury Bond has a par value of $1,000, price of $1,200, and a 7.5% coupon rate, we know the: highlight your answer A. present value is greater than its price. B. current yield is equal to 8.33%. C. coupon payment on this bond is equa..
Two Firms, Firm A and Firm B, are considering the same new project that has a beta of 0.8. The project has an IRR of 9.7%. Firm X has a beta of 1.2 and Firm Y has a beta of 0.6. The risk-free rate is 4% and the expected market risk premium 8%. Which ..
Zippy Corporation just purchased computing equipment for $19,000. The equipment will be depreciated using a five-year MACRS depreciation schedule. If the equipment is sold at the end of its fourth year for $15,000, what are the after-tax proceeds fro..
What are the linkages among financial decisions, return, risk and stock value? Why are these linkages important? How does the financial manager incorporate these as s/he manages the assets and liabilities of the firm? Be sure to include examples to p..
You make monthly payments on your car loan. It has a quoted APR of 6.6%(monthly compounding). What percentage of the outstanding principal do you pay in interest each? month? The percentage of the outstanding principal you pay in interest each month ..
Assume that a new project will annually generate revenues of 1,800,000 and cash expenses (including both fixed and variable costs) of 600,000 while increasing depreciation by 190,000 per year. In addition, the firm’s tax rate is 37%. Calculate the op..
Even though most corporate bonds in the United States make coupon payments semi annually, bonds issued elsewhere often have annual coupon payments. Suppose a German company issues a bond with a par value of €1,000, 20 years to maturity, and a coupon ..
Regulations in the United States prohibit acquiring firms from using common stock to purchase another firm. Regulations in the United States require acquiring firms to use common stock to purchase another firm. Hostile mergers always create value for..
Suppose that the inventory period is 40 days, the accounts payable period is 15 days, and the cash cycle is 35 days. What is the accounts receivable period? (Note: Operating Cycle = Inventory Period + Accounts Receivable Period)
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