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A convertible bond has a 6.5 percent coupon, paid semiannually, and will mature in 10 years. If the bond were not convertible, it would be priced to yield 5.5 percent. The conversion ratio on the bond is 25 and the stock is currently selling for $51 per share. What is the minimum value of this bond?
Kaleb Konstruction, Inc., has the following mutually exclusive projects available. The company has historically used a three-year cutoff for projects. The required return is 13 percent. Calculate the payback period for both projects. Calculate the NP..
The expected return on a security given two unequal states of the economy:
A project has an initial cost of $43,350, expected net cash inflows of $12,000 per year for 6 years, and a cost of capital of 14%. What is the project's PI?
Suppose you believe that after controlling for sensitivity to the market, smaller firms should have higher returns. In two sentences, explain what market frictions would lead to that anomaly.
Which one of the following will decrease the after tax cost of debt for a firm?
Vansel Inc. retains most of its earnings. The company currently has earnings per share of $11. Vansel expects its earnings to grow at a constant rate of 2 percent per year. Furthermore, the average PE ratio of all other firms in Vansel's industry is ..
1 the type of risk that can be diversified away is called .a unsystematic riskb systematic riskc nondiversifiable riskd
The Walgreen Corporation is contemplating a new investment that it plans to finance using one-third debt. The firm can sell new $1000 par value bonds with a 15 year maturity at a price of $946 that carry a coupon interest rate of 12.4 percent that is..
You have been asked by the president of your company to evaluate the proposed acquisition of a new special-purpose machine. The machine's basic price is $1,000,000 and our accountant requires that it be written off over its 5 year class using straigh..
A 30-year maturity bond with face value of $1,000 makes semiannual coupon payments and has a coupon rate of 7.8%. What is the yield to maturity if the bond is selling for $940? What is the yield to maturity if the bond is selling for $1,000?
A firm is considering a capital project for which the following information is available: An existing piece of equipment that would be disposed of to make room for new equipment has a historical cost of $370,000. The firm's effective tax rate is 40%...
Explain the effect on the average lives of sequential-pay structures of including an accrual tranche in a CMO structure.
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