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Midland Utilities has outstanding a bond issue that will mature to its $1,000 par value in 12 years. The bond has a coupon interest rate of 11% and pays interest annually.
a. Find the value of the bond if the required return is(1) 11%,(2) 15%, and(3) 8%.
b. Plot your findings in part a on a set of "required return (x axis)-market value of bond (y axis)" axes.
c. Use your findings in parts a and b to discuss the relationship between the coupon interest rate on a bond and the required return and the market value of the bond relative to its par value.
d. What two possible reasons could cause the required return to differ from the coupon interest rate?
The engineering department estimates you will need an initial net working capital investment of $300,000. You require a 18 percent return and face a marginal tax rate of 38 percent on this project.
Distinguish between a Eurobond, a foreign bond, and a Yankee bond. Which of these three represents the greatest volume of security issuance?
Explain the role and history of the International Accounting Standards Board. Include an examination of Board's evolution and stance on ethics issues.
You wish to retire a $10,000,000 bond that can be called in 5 years for 110 percent of par value, or $11,000,000.
Ring Station Company began business on January 1 and immediately issued 500,000 shares of its $1 par value common stock for $8,000,000. At the end of the year it paid $400,000 in cash dividends.
ABC corporation has operating income of $44,569. The company's depreciation expense is $9,918. The company is all equity-financed and it faces a tax rate of 30%. What is the company's net cash flow?
Williams and Westrich stock is currently selling for $15.25 each share, and the dividend is expected to continue at 92¢ per share. Management expects the stock to grow at 8 percent.
Determine the principal differences between Secured Creditors, Unsecured Creditors, Preferred Stockholders and Common Stockholders? During a partial or complete liquidation, what is the priority of asset distribution?
The investor expects that six months later the bond will be selling to offer a yield to maturity of 6.6%. What is the holding period return of this bond? Assume semiannual compounding.
The following questions are focused on a specific Lender / Borrower relationship
Suppose that the risk free rate of interest is 3 percent and the expected rate of return on the market is 9 percent. A share of stock is selling for $55 at the beginning of the year.
Linda Anderson earned a 10 percent interest in the capital of Doty Associates, a partnership, for services rendered. Doty's net assets at July 1 had a basis of $70,000 and a fair market value of $100,000.
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