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Your firm has a credit rating of A. You notice that the credit spread for five year maturity A debt is 85 basis points (0.85%). Your firm's five year debt has a coupon rate of 6%. You see that new five year treasury notes are being issued at par with a coupon rate of 2.0%. What should the price of your outstanding five year bonds be per $100 of face value?
There has been a new surge of mergers and acquisitions (M and A) in the last several years. Why is this? In the past, why have so many not been successful? In your opinion, what are the most important factors to be taken into account for a successful..
You are scheduled to receive annual payments of $10,800 for each of the next 20 years. Your discount rate is 7 percent. What is the difference in the present value if you receive these payments at the beginning of each year rather than at the end of ..
Forecasted financial statements, as discussed in the text, are used primarily as a part of the managerial compensation program, where management’s historical performance is evaluated. Perhaps the most important step when developing forecasted financi..
The value of an otherwise identical call option is higher if the strike price the holder must pay to buy the stock is higher. Because a put is the right to sell the stock, puts with a lower strike price are less valuable. For a given strike price, th..
Compute the entrepreneur's expected utility. - What is the class of optimal contracts (or, at least, characterize the optimal contract for A = A)?
If a firm buys on trade credit of 1/15, net 90 and decides to forgo the trade credit discount and pay on the net day, what is the annualized cost of forgoing the discount (assume a 360-day year)? The annualized cost of the trade credit terms of 1/15,..
Ethics are an important aspect of corporate culture. The tone at the top is part of what sets expectations for employees. Describe the tone at the top of your organization. If you were in charge, what would you do differently?
The ___ of a given outcome is its chance of occurring.
Suppose you have $2,000 to invest for 4 years. Bank A is willing to pay 5% simple interest and Bank B is willing to pay 4% compounded monthly. Which bank pays the highest total interest? What is the value of the interest earned by the investor?
Discuss reasons why banks might choose to include the following covenants in a loan agreement: a. Cash dividends cannot exceed 60 percent of pretax income. b. Interim financial statements must be provided monthly. c. Inventory turnover must be greate..
Interest versus dividend expense - Michaels Corp. expecst earnings befor inters and taxes to be $50,000 for the current period. Asuuming an ordinarytax rate of 15%, compute the firm's earnings after taxes and earnings available for common stockholder..
How does a 1-basis-point increase in the prevailing interest rate change the value of this bond? - How does the derivative of wealth with respect to the interest rate vary with the length of the bond?
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