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Jiminy’s Cricket Farm issued a bond with 15 years to maturity and a semiannual coupon rate of 10 percent 4 years ago. The bond currently sells for 91 percent of its face value. The company’s tax rate is 38 percent. The book value of the debt issue is $60 million. In addition, the company has a second debt issue on the market, a zero coupon bond with 11 years left to maturity; the book value of this issue is $35 million, and the bonds sell for 51 percent of par.
a) What is the company’s total book value of debt?
b) What is the company’s total market value of debt?
c) What is the best estimate of the after tax cost of debt
Abe holds 1 green and 1 red jelly bean in his hand. Bea holds 1 green, 1 yellow, and 2 red jelly beans in her hand. Each randomly picks a jelly bean to show the other. What is the probability that the colors match?
Prepare all consolidation adjustment entries required to prepare the consolidated financial statements as at 30 June 2011. Provide a brief heading for each adjustment that you prepare.
If you have to pay 1million pounds to UK firm in 60 days. The current spot rate is $1.8 per pound. Two people forecast the future spot rate after 60 days. Jenny forecasts that the spot rate will be $1.72 per pound after 60 days. Amy forecasts that th..
When it comes to estimate Beta, what compromises do we usually make? And in your opinion, which one (or several) of these compromises are mostly likely to affect the validity of beta estimates? Please provide your reasoning.
What is the yield to maturity on a $1,000 face value discount bond maturing in two years that sells for $800 today? What is the annual rate of return on a bond with an annual coupon rate of 10 percent, a face value of $100,000, and its price rises fr..
Ace Products sells marked playing cards to blackjack dealers. It has not paid a dividend in many years, but is currently contemplating some kind of dividend. What adjustments would have to be made to the capital accounts for a 10 percent stock divid..
Assume you are the manager of a routine 30-bed medial unit in an acute care hospital. The total fixed costs of your unit are $500,000 per year. The variable costs of your unit are approximately $100 per day, at the typical level of patient acuity gen..
A project has a 20% chance of having a rate of return of 400% in 1 year and an 80% chance of losing half your money. What is the standard deviation of this investment?
The current price of XYZ stock is $80.00. Dividends are expected to grow at 5% indefinitely and the most recent dividend was $2.75. What is the required rate of return on XYZ stock?
Jacques Smith holds 1,000 shares of General Electric’s (GE) common stock. The annual stockholder meeting is being held soon, but as a minor shareholder, Jacques doesn’t plan to attend. Jacques did not sell his shares but gave his voting rights to the..
Puckett Products is planning for $4.5 million in capital expenditures next year. Puckett's target capital structure consists of 50% debt and 50% equity. If net income next year is $2.8 million and Puckett follows a residual distribution policy with a..
An individual has $110,000 in a retirement account. At the beginning of each year she withdraws $10,000 while earning 10% a year on her money. How much money will be in the account in 20 years? How much will she have in the account after 40 years? Ex..
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