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A company's 5-year bonds are yielding 8.45% per year. Treasury bonds with the same maturity are yielding 6.25% per year, and the real risk-free rate (r*) is 2.2%. The average inflation premium is 3.65%, and the maturity risk premium is estimated to be 0.1 x (t - 1)%, where t = number of years to maturity. If the liquidity premium is 0.55%, what is the default risk premium on the corporate bonds? Round your answer to two decimal places.
Bouncing Baby Foods' (BBF) balance shed shows a total of $20 million long-term debt with a coupon rate of 8.00 percent. The yield to maturity on this debt is 10.00 percent, and the debt has a total current market value of $17.5 million.
X and Y are two American call options on the same stock with the same strike price. X has six month to expiration, while Y has three month to expiration. Which of the following must be true?
Your company (Apple Inc) is considering using the payback period for capital-budgeting. Discuss the advantages and disadvantages of this technique. Your company (Apple Inc) is considering the construction of a new building. The building will have an ..
Gillian Stationary Corporation needs to raise 600,000 to improve its manufacturing plant. It has decided to issue a 1000 par value bond with an annual percentage rate of 8.0 percent with interest paid semi annually and a 10 year maturity. Investors r..
The Ocean City water park is considering the purchase of a new log flume ride. The cost to purchase the equipment is 3,500,000 and it will cost an additional 250,000 to have it installed. Using the Goal Seek tool, calculate the minimum ticket price t..
Merge the relations for the four user views into a single set of 3NF relations, using the guidelines presented in this chapter. Draw a single relational schema for the four user views and show the referential integrity constraints
Identify each of the following situations as involving sunk costs, opportunity costs, and/or cannibalization. Indicate what amount, if any, of these items would be relevant to the given investment decision.
Mr. Smith has saved $1,200 each year for 25 years. A year after the saving period ended, Mr. Smith withdrew $4,500 each year for a period of 5 years. In the sixth and seventh years, he only withdrew $3,000 per year. In the eighth year, he decided to ..
Firm BestHockeySticks needs to buy rubber to manufacture their hockey pucks. Specifically, they need to buy 3 tons of rubber for next winter, January 2017 (T = 3/4). The future price of rubber is uncertain. BestHockeySticks buys 2 Call options with s..
The WACC formula calculates the after-tax cost of debt, but it doesn’t make any similar adjustments to the cost of preferred stock or common equity. Why the difference?
After developing a prospect base, targets are screened (or organized) for contact prioritization. Which of the following can be used for screening criteria? All of the following statements are true about Letters of Intent, except for: The final price..
Emily is in the 25% bracket and has $15,000 available for investment during her current tax year. Assume that she remains in the same tax bracket over the next 7 years and determine the accumulated amount of her investment if she puts the $15,000 int..
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