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(Cost of debt) The Zephyr Corporation is contemplating a new investment to be financed 33 percent from debt. The firm could sell new $1,000 par value bonds at a net price of $965. The coupon interest rate is 12 percent, and the bonds would mature in 15 years. If the company is in a 35 percent tax bracket, what is the after-tax cost of capital to Zephyr for bonds?
Unsophisticated capital budgeting techniques do not: a. examine the size of the initial outlay b. take into account unconventional cash flow patters c. explicitly consider the time value of money d. use net profits as a measure of return
Compare and contrast the gain and loss potential for investors holding the following positions: long forward, short forward, long call, short call, long put, and short put. Indicate what the terms symmetric and asymmetric mean in this context.
If the firm declares a 10 percent stock dividend, what will be the impact on the firm's equity accounts? what is the impact of a 10 percent stock dividend on the wealth position of the firm's existing stockholders?
The percent of sales method of forecasting assumes which of the following is constant?
Which one of the following statements concerning the relationship between the volatility of the underlying stock price, as measured by sigma, and call and put prices is correct?
Even though most corporate bonds in the United States make coupon payments semiannually, bonds issued elsewhere often have annual coupon payments. Suppose a German company issues a bond with a par value of €1,000, 15 years to maturity, and a coupon r..
According to relative purchasing power parity, if the inflation rate in Italy was 8% and the inflation rate in Israel was 6%,
Today, you purchased 100 shares of Lazy Z stock at a market price of $47 per share. You also bought a one year, $45 put option on Lazy Z stock at a cost of $0.15 per share. What is the maximum total amount you can lose on these purchases?
What factors influence a company’s weighted average cost of capital (WACC)? Should the component costs of a company be figured on a before-tax or an after-tax basis? Why?
At year-end 2016, Wallace Landscaping’s total assets were $1.0 million and its accounts payable were $340,000. Sales, which in 2016 were $2.2 million, are expected to increase by 30% in 2017. Total assets and accounts payable are proportional to sale..
Bass Frozen Foods, Inc. has found three acceptable investment opportunities. What portion of the new investments will be financed by common equity and what portion by debt? According to the residual dividend theory, how much would be paid out in divi..
The bonds make semi-annual payments and currently sell for 105 percent of par. What is the current yield on the bonds?
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