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Corporate finance:
A company has a zero-coupon bond outstanding, with face value 1000 and a 2 year maturity. The bond is risky but bears no systematic risk. There are two equally likely scenarios at maturity: in the first the bond will be fully repaid so the bankruptcy costs are zero, in the second the company will be bankrupt and the bondholder will receive 700 less the bankruptcy costs. The risk free interest rate is 5% and the market value of the bond is 720.
What is the monetary value of the bankruptcy costs at year 2 born by bond holders?
A 7.4 percent corporate coupon bond is callable in five years for a call premium of one year of coupon payments. Assuming a par value of $1,000, what is the price paid to the bondholder if the issuer calls the bond?
Company Z issued bonds with detachable warrants several years ago. Each warrant allows the holder to purchase one share of stock at $30 per share. The stock has a beta of 1.3. How much would an investor likely be willing to pay for the warrant over a..
1. explain in your own words when and how the composition of capital the mix of debt and equity does not affect the
Suppose that you are considering making a working capital loan to a business customer of your bank. You do the cash to cash cycle analysis and determine that the firm's daily average cost of goods sold is $ 50,000. What does this mean?
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On the basis of your answers to Problems 21-1 and 21-2, if Harrison were to acquire Van Buren what would be the range of possible prices it could bid for each share of Van Buren common stock?
The theory of purchasing power parity
We respect and understand that quality of care is a worthy goal and absolute requirement for healthcare providing organizations. Give three examples of how quality of care may be increased and achieved.
Consider a 20 year, $1000 bond with a coupon rate of 9% and quarterly coupons. By looking at Bloomberg you can see that this bond has most recently traded at a price of $1462.62. Give two numbers (a,b) such that the yield to maturity of bond is betwe..
Using the American term quotes from Exhibit 5.4, Calculate the one-, three-, and six-month forward cross-exchange rates between the Australian dollar and the Swiss franc. State the forward cross-rate in “Australian” terms.
adding debt will increase the firms ROE as long as the cost of debt is less than their basic earning power. the level of debt does not affect the business risk of a firm. if a company increases its level of debt, then its net income will increase
If a firm pays a $2 dividend and that is expected to remain constant, what is the value of the common stock, if the firm’s required rate of return is 16%?
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