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Suppose company A and B have access to the borrowing market with following rate (table). It is known that A wants to borrow at a fixed rate while B wants to borrow at a floating rate.
Counterparty Fixed Rate Floating Rate
A 8.0% 6-month LIBOR + 0.5%
B 7.0% 6-month LIBOR
Now please answer following questions:
(1) What's the total cost savings can be realized?
(2) Suppose they (A and B) split the cost savings evenly. How much would A pay for its fixed rate funds? How much would B pay for its floating rate funds?
(3) Suppose the intermediary bank gains profit of 0.1%, redo the above problem (2)?
Camp Manufacturing currently has average inventories of 90 days and accounts receivable are typically collected in 60 days. Camp’s payables are paid 30 days after the invoice is received. The company has sales of $30,000,000. Using a 365 day year, Wh..
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The primary disadvantage of relying on short-term credit for continuous financing needs is: Issuing new bonds to replace old bonds is called:
Given the following information; Risk free rate = 3%, Volatility = beta= 5.6,
Calculate Usher Sports Shop’s cash flow from operations for 2015.
Billy’s Exterminators, Inc., has sales of $604,000, costs of $308,000, depreciation expense of $60,000, interest expense of $40,000, and a tax rate of 35 percent. What is the net income for this firm?
Cole Company has 302,000 shares of common stock authorized, 254,000 shares issued, and 67,000 shares of treasury stock. The company’s board of directors has declared a dividend of 76 cents per share. What is the total amount of the dividend that will..
An investment costs $20,000 today and will return $3,000 at the end of each of the next 10 years. What is the interest rate of return on this investment?
Beginning three months from now, you want to be able to withdraw $1,800 each quarter from your bank account to cover college expenses over the next three years. If the account pays 0.40 percent interest per quarter, how much do you need to have in yo..
What will be the nominal rate of return on a perpetual preferred stock with a $100 par value, a stated dividend of 12% of par, and a current market price of (a) $60.00, (b) $88.00, (c) $113.00, and (d) $132.00?
What is the quantity f of the hedging instrument that the investor has to sell? We suppose that the YTM curve increases instantaneously by 0.1%.
Crisp Cookware's common stock is expected to pay a dividend of $2.5 a share at the end of this year.
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