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Jiminy’s Cricket Farm issued a 30-year, 6 percent semiannual bond 3 years ago. The bond currently sells for 92 percent of its face value. The company’s tax rate is 40 percent. Suppose the book value of the debt issue is $50 million. In addition, the company has a second debt issue on the market, a zero coupon bond with 12 years left to maturity; the book value of this issue is $50 million, and the bonds sell for 54 percent of par. What is the company’s total book value of debt? (Enter your answer in dollars, not millions of dollars, i.e. 1,234,567.) Total book value $ what is the company’s total market value of debt? (Enter your answer in dollars, not millions of dollars, i.e. 1,234,567.) Total market value $ what is your best estimate of the after-tax cost of debt?
Title of the article that you are to read:"Agency Problems in Public Firms: Evidence from Corporate Jets in Leveraged Buyouts" by Jesse Edgerton.Published in the Journal of Finance, December 2012.
Residential Inc. produced substantial profits in the previous year. Assume that Residential pays 35% corporate income tax. If investors are taxed at 25% on ordinary income, and have 0% capital gains tax, would Residential’s common stock investors pre..
Luis has $190,000 in his retirement account at his present company. Because he is assuming a position with another company, Luis is planning to "roll over" his assets to a new account. Luis also plans to put $3000/quarter into the new account until h..
Provide an estimate of the value of the company, indicating the proportion of the value accounted for by the company's growth prospects and determine the prospective price-earnings ratio of the company and comment on its anticipated change in value..
The Dallas Electronics Company is considering replacing an old, 1,000-pound-capacity industrial forklift truck. The truck has been used primarily to move goods from production machines into storage. If Dallas decided to purchase the truck, it would g..
Zucha Corporation has an inventory period of 55 days, an accounts receivable (A/R) period of 6 days, and an accounts payable (A/P) period of 3 days. The company’s annual sales is $182,795. Answer following questions. How many times per year does the ..
Earnhardt Driving School’s 2010 balance sheet showed net fixed assets of $4.7 million, and the 2011 balance sheet showed net fixed assets of $5.3 million. The company’s 2011 income statement showed a depreciation expense of $405,000. What was net cap..
If Treasury bills are currently paying 6.45 percent and the inflation rate is 1.4 percent, what is the approximate and the exact real rate of interest?
Present and future values for different interest rates-Find the following values. Compounding/discounting occurs annually. An initial $700 compounded for 10 years at 8%.
Consider two mutually exclusive projects with the following cash flows: Project S is a 4 year project with initial (time 0) cash outflow of 3000 and time 1 through 4 cash inflows of 1500, 1200, 800 and 300 respectively. Project L is a 4 year project ..
Maybepay Life Insurance Co. is selling a perpetual annuity contract that pays $2,800 monthly. The contract currently sells for $328,000. Requirement 1: What is the monthly return on this investment vehicle? What is the APR? What is the effective annu..
You own a 5-year bond with a face value of $1,000 and a coupon rate of 5 percent with annual payments. The bond is currently worth $810.46. If market interest rates remain unchanged, what will be the value of the bond next year when there are 4 years..
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