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Assume 35% taxes. Equipment can be leased at $10,000 per year (first payment one year hence) for ten years or purchased at a cost of $64177. The company has a weighted average cost of capital of 15 percent. A bank has indicated that it would be willing to make a loan of $64,177 at a cost of 10 percent. The equipment will be used for ten years, There is zero salvage value. Please do not use Wacc. To compare we have to use the same rate as the bank)
1) Should the company buy or lease?
A firm's bonds have a maturity of 10 years with a $1,000 face value, have an 8% coupon rate paid semi annually, and are callable in 5 years at $1050. They currently sell at a price of $1,100. What is the yield to call? What is the yield to maturity?
Individuals with starting salaries of less than $15,800 receive a low income tax break. What percentage of the graduates will receive the tax break?
Use our incremental Black-Scholes model to generate a possible sequence of stock prices for this stock over the course of a year.
Neubert Enterprises recently issued $1,000 par value 15-year bonds with a 6% coupon paid annually and warrants attached. These bonds are currently trading for $1,000. Neubert also has outstanding $1,000 par value 15-year straight debt with a 8% coupo..
Consider a portfolio of options on a single asset. Suppose that the delta of the portfolio is 12, the value of the asset is $10, and the daily volatility of the asset is 2%. Estimate the 1-day 95% VaR for the portfolio from the delta.
How much will the company pay in dividends if it follows a residual dividend policy? What are 3 disadvantages of following a residual dividend policy?
Determine how much Gibson must reduce its debt in 2005 (for example, through the sale of common stock) to maintain its DCL at the 2004 level.
What are the strengths and weaknesses of DEAR (daily earnings at risk) approach.
How many new shares will be issued? What will be the price of these additional shares? what will be the new price of HFA after this dilution?
A company has 30 million shares outstanding trading for $8 per share. It also has $90 million in outstanding debt. If its equity cost of capital is 15%, and its debt cost of capital is 9%, and its effective corporate tax rate is 40%, what is its weig..
Explain how a balance sheet and an income statement are constructed. What does the balance sheet tell you about how an organization functions?
Howard gives his money manager 100,000 at the beginning of the year. in 6 months the account is worth 105,000 and Howard immediately gives the manager an additional 95,000. At the end of the year, the account is worth 220,000. What is the time-weight..
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