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You find a bond with 15 years until maturity that has a coupon rate of 8.0 percent and a yield to maturity of 7.1 percent. Suppose the yield to maturity on the bond increases by .25 percent. 1. What is the new price of the bond using duration? (Round your answers to 2 decimal places. Omit the "$" sign in your response.) Estimated price $ Actual price $ 2. What is the new price of the bond if interest rates increase by 1 percent? (Round your answers to 2 decimal places. Omit the "$" sign in your response.) Estimated price $ Actual price $
Quantitative Problem: Barton Industries expects that its target capital structure for raising funds in the future for its capital budget will consist of 40% debt, 5% preferred stock, and 55% common equity. What is the firm's weighted average cost of ..
Walker & Campsey wants to invest in a new computer system, and management has narrowed the choice to Systems A and B. System A requires an up-front cost of $100,000, after which it generates positive after-tax cash flows of $60,000 at the end of each..
The difference between the yield to maturity and the yield to call is that yield to maturity is the presumed yield an investor will earn if they hold a bond until it is called. Yield to call is the presumed yield an investor will earn if they buy the..
Pangbourne Whitchurch has preferred stock outstanding. The stock pays a dividend of $3 per share, and sells for $30. What is the percentage cost of the preferred stock? (Enter your answer as a whole percent.)
Calculate the levered internal rate of return of this investment (assuming no debt and no taxes). Should you purchase? Why?
A woman of a large Japanese company has purchased 16,000 widgets from you. The USD value of the widgets is $16,000. Terms of payment are NET 90. The exchange rate at the time of billing/invoicing USD1=80 yen. Her bank pays you via electronic funds tr..
The Z-90 project being considered by Steppingstone Inc. (SI) has an up-front cost of $250,000. The project's subsequent cash flows are critically dependent on whether another of its products, Z-45, becomes an industry standard. what is the Z-90's exp..
Paradise Adventures just paid a dividend of $2.00. They are growing rapidly and are expecting to grow dividends at 20% for the next two years and then 10% in the third year before reducing the dividends to a constant growth rate of 3%. If the require..
Assume these securities are correctly priced. Based on the CAPM, what is the expected return on the market? What is the risk-free rate?
You are the manager of 10 people in a large organization. Everyone becomes very suspicious and upset when they receive a memo from the HR department saying their jobs are going to ve evaluated. What will you do in response to their concerns? (Give Ci..
You’ve observed the following returns on Crash-n-Burn Computer’s stock over the past five years: 12 percent, –9 percent, 20 percent, 17 percent, and 10 percent. What was the average real risk-free rate over this time period?
Explain the relationship between NPV and a firm's value. What is the cost of capital? What role does it play in capital investment decisions?
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