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Dairy Corp. has a $20 million bond obligation outstanding and a coupon rate of 8%. Dairy Corp. has the ability to buy back the debt at 7% above par and issue new debt at 6.5%, so it is considering refunding this bond.Assume the underwriting cost for the old issue was $100,000 and the new issue is $200,000, with a tax rate of 40%. What is the net cost of call premium
You have saved $10,000 toward a down payment on a home. The money is invested in an account earning 7% interest. You will be ready to purchase the new home once your savings account grows to $25,000. If the interest rate doubles to 14%, how many year..
OMG Inc. has 5 million shares of common stock outstanding, 4 million shares of preferred stock outstanding, and 6,000 bonds. Suppose the common shares are selling for $18 per share, the preferred shares are selling for $27 per share, and the bonds ar..
Suppose Community Bank offers to lend you $20,000 for one year at a nominal annual rate (annual percentage rate) of 6.00%, but you must make interest payments at the end of each month and then pay off the $20,000 principal amount at the end of the ye..
Apocalyptica Corporation is expected to pay the following dividends over the next four years: $6.50, $17.50, $22.50, and $4.30. Afterward, the company pledges to maintain a constant 5 percent growth rate in dividends, forever. If the required return ..
Assume that the annual interest rate on a six month us treasury bill is 5% and use the data presented in figure 18.1 to answer the following: Calculate the annual interest rate on six-month bills in Canada and Japan.
Eric Scanzillo, a manager at the Plate Division for Ore City Manufacturing Company, has the opportunity to expand the division by investing in additional machinery costing $430,000. Calculate the net present value of this investment. Calculate the ac..
On July 5, a stock index futures contract was at 394.85.- Determine if an arbitrage opportunity was available, and explain what transactions were executed.
When you graduate you have $15,000 on your credit card which charges an APR of 14% compounded monthly. The credit card company tells you that your minimum payment is $232.90. If you make the minimum payment every month, After an injury, you win a law..
What is the difference between required reserves and excess reserves? What is the definition of the required reserve ratio?
A corporate bond is quoted at a current price of 102.767. What is the market price of a bond with a $1,000 face value? Your firm offers a 10-year, zero coupon bond. The yield to maturity is 7%. What is the current market price of a $1,000 face value ..
Flatte Restaurant is considering the purchase of a $9,100 soufflé maker. The soufflé maker has an economic life of five years and will be fully depreciated by the straight-line method. The machine will produce 1,550 soufflés per year, with each costi..
FARO Technologies, whose products include portable 3D measurement equipment, recently had 17 million shares outstanding trading at $42 a share. Suppose the company announces its intention to raise $200 million by sell new shares. What do market signa..
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