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Assume the rate on the issuance of $100m of 100-year bonds is 7.5%; the annual debt service payment would be $7.505m. How high would the interest rate have to be on 30-year bonds for the annual debt service payment to be the same for both financings?
A second way to assess the 100-year bond is to consider a $100m 30 year issue with a 5% rate. The present value of this cash flow stream is $100m, using a 5% discount rate. Suppose you use 5% as the discount rate to assess the present value of the cash flow stream of the 100- year issue. How many years would it take to reach $100m in present value?
Determine the Standard Deviation about the Expected Value and calculate the Expected Value of the Net Present Value - what is the probability that the present value index will be 1 or less
Microtech Corporation is expanding rapidly and currently needs to retain all of its earnings; hence, it does not pay dividends. However, investors expect Microtech to begin paying dividends, beginning with a dividend of $1.50 coming 3 years from toda..
You have just purchased a new warehouse. To finance the purchase, you've arranged for a 25-year mortgage for 80 percent of the $1,800,000 purchase price. The monthly payment on this loan will be $10,800. What is the APR?
As of today, the First ECON Bank of Arlington currently holds: If we assume that that entire amount of the transaction deposits is a subject to the legal 10% reserve requirement, please indicate the required course of the bank’s action to manage its ..
Each month the US Bureau of Labor Statistics publishes a variety of unemployment statistics, including the number of individuals who are unemployed and the mean length of time the individuals have been unemployed. Develop a 95% confidence interval es..
Sports Corp has 11.2 million shares of common stock outstanding, 6.2 million shares of preferred stock outstanding, and 2.2 million bonds. If the common shares are selling for $26.2 per share, the preferred share are selling for $13.7 per share, and ..
As a financial officer of a corporation, which would you typically recommend to your board of directors when deciding to borrow: a line of credit or a revolving credit agreement? Explain why you selected that recommendation?
Honest John's Car Dealership advertises his "understandable" financing plan on car purchases as follows. You pay 10% of the car's full price up front and 4% of the car's full price in 30 equal end-of-month payments For instance, if a car cost $15,000..
How can options sell for more than their exercise value and whats wrong with using payback period? What should we use instead? Why?
Rekall Inc., the memory implant company, has 7 million shares of common stock outstanding and 100,000 semi-annual bonds. Dividends are paid annually and are expected to grow in perpetuity at 3%. The bonds sell for 94% of face value and have a 10.42% ..
Concrete construction has a return on assets (ROA) of 5 percent, a 2 percent profit margin, and a return on equity (ROE) OF 11 percent. What is its equity multipler?
At the beginning of 2013, Norris Company had a deferred tax liability of $7,000, because of the use of MACRS depreciation for income tax purposes and units-of-production depreciation for financial reporting. Norris had a retained earnings balance of ..
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