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Capital Healthplans Inc. is evalauating two different methods for providing home health services to its members. Both methods involvce contracting out for services, and the health outcomes and revenues are not affected by the methos chosen. Therefore, the net cash flows for the decision are all outflows. Here are the projected flows:
Year Method A Method B
0 ($300,000) ($120,000)
1 ($66,000) (96,000)
2 (66,000) (96,000)
3 (66,000) (96,000)
4 (66,000) (96,000)
5 (66,000) (96,000)
6 (66,000) (96,000)
a. what is each alternative's IRR?
b. if the opportunity cost of capital for both methods is 9% which method should be chosen? Why?
Night Hawk Co. issued 17-year bonds two years ago at a coupon rate of 10.1 percent. The bonds make semiannual payments. If these bonds currently sell for 97 percent of par value, what is the YTM? (Do not include the percent sign (%). Enter rounded an..
Far Side Corporation is expected to pay the following dividends over the next four years: $11 in year 1, $8 in year 2, $5 in year 3, and $2 in year 4. Afterward, the company pledges to maintain a constant 5 percent growth rate in dividends forever. I..
The market and stock J have the following probability distributions: Calculate the expected rates of return for the market and stock J.
Because of a recession, the inflation rate expected for the coming year is only 3%. However, the inflation rate in Year 2 and thereafter is expected to be constant at some level above 3%. Assume that the real risk-free rate is r* 5 2% for all maturit..
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An investor purchases a stock for $56 and a put option for $.80 with a strike price of $50. The investor also sells a call option for $.80 with a strike price of $66. What is the maximum profit and loss for this position?
The risk-free rate of return is 4%, the required rate of return on the market is 10%, and High-Flyer stock has a beta coefficient of 2.0. If the dividend per share expected during the coming year, D1, is $4.60 and g = 6%, at what price should a share..
Multinational Financial Management
Prepare the journal entry to reflect the initial $86,000 investment and evaluate the three proposals for expansion, providing the pros and cons of each option.
Endicott Enterprises Inc. has issued 30-year semiannual coupon bonds with a face value of $1,000. If the annual coupon rate is 14% and the current yield to maturity is 15%, what is the firm's current price per bond?
If the following bonds are identical except for coupon and price, what is the coupon of bond B?
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