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Yield to Maturity and Call with Semiannual Payments Thatcher Corporation's bonds will mature in 11 years. The bonds have a face value of $1,000 and an 9% coupon rate, paid semiannually. The price of the bonds is $1,050. The bonds are callable in 5 years at a call price of $1,050. Round your answers to two decimal places. What is their yield to maturity? What is their yield to call?
Firms HL and LL are identical except for their financial leverage ratios and the interest rates they pay on debt. Each has $22 million in invested capital, has $4.4 million of EBIT, and is in the 40% federal-plus-state tax bracket. Calculate the retu..
Consider a firm in an industry in which technology improvements are constantly lowering its cost of physical capacity. On average, the cost to acquire a unit of physical capacity drops by about 15% per year and is expected to continue to do so for th..
Alexandria's Dance Studio is currently an all-equity firm with earnings before interest and taxes of $338,000 and a cost of equity of 14.2 percent. The tax rate is 34 percent. Alexandria is considering adding $400,000 of debt with a coupon rate of 7 ..
You are chairperson of the investment fund for the Continental Soccer League. You are asked to set up a fund of semiannual payments to be compounded semiannually to accumulate a sum of $270,000 after 15 years at an 14 percent annual rate (30 payments..
You have the chance to participate in a project that produces the following cash flows: Cash Flows, $ C0 C1 C2 ; +5,000 +4,000 –11,000. The internal rate of return is 13%. If the opportunity cost of capital is 10%, what is the NPV of the project?
Colins Company current return on equity (ROE) is 16%. It pays out one-quarter of earnings as cash dividends. Current book value per share is $35. The company has 5 million shares outstanding. What is the terminal value? What is the current value of C..
Winnebagel Corp. currently sells 29,700 motor homes per year at $81,500 each and 8,700 luxury motor coaches per year at $123,500 each. The company wants to introduce a new portable camper to fill out its product line; it hopes to sell 24,700 of these..
Define and explain the term auditing.'' Personal qualities of an auditor are important for the successful conduct of audit ''. Write the key objectives of a good internal audit system. Narrate the points of dissimilarities between external audit and ..
Consolidated Enterprises issues €10 million face value, five-year bonds with a coupon rate of 6.50 percent. At the time of issuance, the market interest rate is 6.0 percent. Using the effective interest rate method of amortization, the carrying value..
Find the following values for a lump sum assuming annual compounding: What is the effective annual rate (EAR) if the stated rate is 8 percent and compounding occurs semiannually? Quarterly?
A firm has 0 debts in its capital structure. Its overall cost of capital is 9%. The firm is considering a new capital structure with 40% debt. The interest rate on the debt would be 4%. Assuming that the corporate tax rate is 34%, what would be its c..
A company needs a certain type of machine for the next 5 years. They presently own such a machine, which is now worth $6,000 but will lose $2,000 in value in each of the next 3 years, after which it will be worthless and unusable.
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