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You are trying to forecast the expected level of aggregate Toronto stock market for the next year. Suppose the current T-Bill rate is 4%, and the yield to maturity for the 10-year Canada bonds is 5% per year, the expected rate of inflation is 2% per year, and the expected EPS for the S&P/TSX composite is $450.
What is your forecast level, assuming 3.5% risk premium (difference between corporate earnings yield and 10-year government bond)?What is your forecast, assuming no risk premium?
Suppose now (forgetting all prior assumptions) that the firm plans to finance the entire $285 million project by selling 6% coupon bonds. The underwriter will charge a spread of 1.75%; the legal and administrative fees associated with the project amo..
Walther's financial analysts have estimated the marginal, after-tax cost of debt, preferred stock, and common equity to be 9 percent, and 18 percent, respectively. What is the weighted marginal cost of capital for Walther?
Amarillo Parts is considering purchasing a small firm in the same line of business. The purchase would be financed by either the sale of common stock or by a bond issue. What is the degree of financial leverage for each plan at $7,000,000 of EBIT? Wh..
Kenny, Inc., is looking at setting up a new manufacturing plant in South Park. The company bought some land six years ago for $7.6 million in anticipation of using it as a warehouse and distribution site, but the company has since decided to rent fac..
There is an expression that it is best to operate a business using “other people’s money.” Given that other people’s money is reflected in accounts payable, explain how accounts payable affects the external funds required (EFR).
Delmont Transport Company (DTC) is evaluating the merits of leasing versus purchasing a truck with a 4-year life that costs $40,000 and falls into the MACRS 3-year class. What is the net advantage to leasing?
Seth Bullock, the owner of Bullock Gold Mining, is evaluating a new gold mine in South Dakota. Dan Dority, the company's geologist, has just finished his analysis of the mine site. Construct a spreadsheet to calculate the payback period, internal rat..
He is willing to buy your C$200 for 1500 New Pesos. Should you accept the offer or cash the Canadian dollars in at the airport? Explain.
Suppose Baa-rated bonds currently yield 7.1%, while Aa-rated bonds yield 5.1%. Now suppose that due to an increase in the expected inflation rate, the yields on both bonds increase by 1.0%. What would happen to the confidence index?
Bond valuation Nungesser Corporation's outstanding bonds have a $1,000 par value, a 9% semiannual coupon, 14 years to maturity, and an 7.5% YTM. What is the bond's price? Round your answer to the nearest cent. show how you would derive the solution u..
Rewrite 12/16 in a lower-term fraction, and 3/5 in a first-step-higher fraction.- Rewrite 5/4 in mixed number format, and turn 1.2/3 into regular fraction format.
When the company began the year, current assets were $125,063 and current liabilities were $128,532. When the company ended the year, the current assets were $126,162 and current liabilities were $121,562. What was the change in the company’s net wor..
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