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A firm has excess idle cash due to seasonal fluctuations in cash flow. Management is considering investing the funds in five-year corporate bonds issued by a local firm. What are the pros and cons of this strategy?
Rd = yield on the firm's bonds = 7.00% and the risk premium over its own debt cost = 4.00%. (2) Rf = 3.00%, RPM = 6.00%, and beta = 1.25. (3) D0 = $1.20, P0 = $35.00, and g = 6.00% (constant). You were asked to estimate the cost of common equity base..
If rates in the market fall between now and one month from now, the mortgage banker:
You are lending your friend $25,000. She agrees to repay the loan in equal quarterly payments over a three-year period at an interest rate of 8% compounded quarterly. How much interest will you earn over the life of the loan?
Comfy Coach Travel Agencies has a price of $72 per share and the dividends have been: 2010 - $1.25, 2011 - $1.28, 2012 - $1.35, 2013 - $1.42, 2014 - $1.51. What is the company's required rate of return? (show work)
Zhao Automotive issues fixed-rate debt at a rate of 7.00%. Zhao agrees to an interest rate swap in which it pays LIBOR to Lee Financial and Lee pays 6.8% to Zhao. What is Zhao’s resulting net payment?
What portfolio of options and risk-free asset (if any) can be used to replicate the payoffs of a forward contract on IBM stock with 9 months to maturity? Assume the forward price satisfies no-arbitrage pricing. IBM stock currently trades for $90/shar..
A project requires an initial cash outlay of $95,000 and has expected cash inflows of $20,000 annually for 9 years. The cost of capital is 10%. What is the project’s NPV? Show your work.
The U. S. experienced an inflation rate of 4 percent last year while Spain's inflation last year was 2 percent. Based on purchasing power parity, the euro will:
LOU Limited is a US firm and expects to receive Singapore $800, 000 in one year. The existing spot rate of the Singapore dollar is US$0. 74. The one-year forward rate of the Singapore dollar is US$0.76. Novena Limited created a probability distributi..
If we input a positive PV in our calculator, we get a negative FV if that is what we are solving for. The reverse it true as well. Put in a positive, and the answer is negative. The compounding or discounting effect. Cash flow sign convention
Imagine you are discussing a loan with a somewhat unscrupulous lender. You want to borrow $20,000 for one year. The interest rate is 12.5 percent. You and the lender agree that the interest on the loan will be 0.125 × $20,000 = $2,500. So the lender ..
If his opportunity cost is 6% compounded annually, what value should he place on opportunity today? What is most he should pay to purchase this payment today?
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