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Consider a two-date binomial model. A company has both debt and equity in its capital structure. The value of the company is 100 at Date 0. At Date 1, it is equally like that the value of the company increases by 20% or decreases by 10%. The total promised amount to the debtholders is 100 at Date 1. The riskfree interest rate is 10%.
a. What are the possible payoffs to the equityholders at date 1? What kind of financial product has the same payoffs? Please describe the detailed characteristics of the financial product.
b. What are the possible payoffs to the bondholders at date 1? Are they riskfree? What kind of financial product/portfolio has the same payoffs? Please describe the detailed characteristics of the financial product/portfolio.
You are evaluating a project for The Tiff-any golf club, guaranteed to correct that nasty slice. You estimate the sales price of The Tiff-any to be $430 per unit and sales volume to be 1,000 units in year 1; 1,500 units in year 2; and 1,325 units in ..
Suppose that today's stock price is $63.43. If the required rate on equity is 13.5% and the growth rate is 4.4%, compute the expected dividend (i.e. compute D1)
Fox Ten Limited (FTL) is a new company and management are trying to decide on a financing structure. They need to raise funds of $15 million and are deciding between the following options: The first option is to use 90% equity and 10% debt. It will i..
You invested $100,000 in a mutual fund at the beginning of the year when the NAV was $40.13. At the end of the year the fund paid $.42 in short-term distributions and $.59 in long-term distributions. If the NAV of the fund at the end of the year was ..
Muscarella Inc. has the following balance sheet and income statement data: Cash $ 14,000 Accounts payable $ 42,000 Receivables 70,000 Other current liabilities 28,000 Inventories 210,000 Total CL $ 70,000 Total CA $294,000 Long-term debt 70,000. Assu..
Please help me to answer the following questions with tables, figures, and addenda for financial analysis Apple Company in Assessing A Company’s Future Financial Health. Analysis of fundamentals: goals, strategy, market, competitive technology, and r..
McCurdy Co.'s Class Q bonds have a 12-year maturity, $1,000 par value, and a 5.25% coupon paid semi annually (2.625% each 6 months), and those bonds sell at their par value. McCurdy's Class P bonds have the same risk, maturity, and par value, but the..
Suppose a stock had an initial price of $72 per share, paid a dividend of $1.20 per share during the year, and had an ending share price of $61. Compute the percentage total return. What was the dividend yield and the capital gains yield?
A project will produce operating cash flows of $45,000 a year for four years. During the life of the project, inventory will be lowered by $30,000 and accounts receivable will increase by $15,000. At the end of the project, net working capital will r..
Payne Product's sales last year were anemic $1.6 million, but with an improved product mix it expects sales growth to be 25% this year, and Payne would like to determine the effect of various current asset policies on its financial performance. What ..
Mary is purchasing a home for 294000$. She will finance her mortgage for 15 years with 4% interest. She is paying 20% down payment of the purchase price. Mary's annual taxes are 2564$ and her annual homeowner insurance is 1778$. Find the amount of th..
How does a savings bank differ from a credit union? Are the CD rates at credit unions typically higher or lower than those at savings banks? What's direct financing? What's indirect financing?
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