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Pangaea Corporation needs to raise funds to finance a plant expansion, and it has decided to issue 25-year zero coupon bonds to raise the money. The required return on the bonds will be 7 percent.
a. What will these bonds sell for at issuance? (Round your answer to 2 decimal places. (e.g., 32.16))
b. Using the IRS amortization rule, what interest deduction can the company take on these bonds in the first year? In the last year?
Frazier Manufacturing paid a dividend last year of $2, which is expected to grow at a constant rate of 5%. Frazier has a beta of 1.3. If the market is returning 11% and the risk-free rate is 4%, calculate the value of Frazier's stock.
Calculate the standard deviation of expected returns, ?X, for Stock X (?Y = 19.83%.) Round your answer to two decimal places.
A company enters into a long futures contract to buy 5,000 bushels of wheat for 250 cents per bushel. The initial margin is $3,000 and the maintenance margin is $2,000.
What is the maximum initial cost the company would be willing to pay for the project?
Explain the major factors behind the collapse of the United State mortgage markets. What role, if any, did financial innovation play in collapse of the mortgage market that start in the summer of 2007?
A corporation purchased a new factory equipment for $650,000. The machine is expected to be productive for 5 years and, at the end of the five years, it is expected to be worth $50,000 in salvage value.
A currency trader observes that in the spot exchange market, one U.S. dollar can be exchanged for 114.35 Japanese yen or for 1.0611 euros. How many euros would you receive for every yen exchanged?
Gearworks, corporation manufactures parts for industrial machinery. The manufacturing process needs a variety of machines that grind, heat treat, & polish steel into various shapes.
During the period, the Far East sales office generated 669 orders for a total of 6,190 items. These orders were shipped in 1,450 boxes. What amount of shipping department costs should be allocated to these sales?
John Fleming has been shopping for a loan to finance the buy of a used car. He has found three possibilities that seem attractive and wishes to choose one with the lowest interest rate.
The market risk premium is 7 percent, T-bills are yielding 3 percent, and Titan Mining's tax rate is 38 percent. What is the firm's market value capital structure?
Compute the weighted average cost of capital. (Round your intermediate and final answers to 1 decimal place. Omit the "%" sign in your response.)
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