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Liu Industrial Machines issued 147,000 zero coupon bonds four years ago. The bonds originally had 30 years to maturity with a yield to maturity of 7.2 percent. Interest rates have recently increased, and the bonds now have a yield to maturity of 8.3 percent.
If the company has a $46.2 million market value of equity, what weight should it use for debt when calculating the cost of capital? (Do not round intermediate calculations and round your answer to 4 decimal places, e.g., 32.1616.)
Weight of debt=_____________?
The firm's required pretax return on receivables investments is 20 percent. Determine the net effect on Jenkins' pretax profits of offering a 1 percent cash discount.
You have just received notification that you have won the $1 million first prize in the Centennial Lottery. However, the prize will be awarded on your 100th birthday (assuming you’re around to collect), 80 years from now. What is the present value of..
Suppose the real risk-free rate currently is 3% and a maturity risk premium of 0.15% per year to maturity applies, i.e., MRP=0.15%*t, where t is the years to maturity. The averaged expected inflation rate over the next following 3 years is 2.5%. If t..
Suppose you held a well-diversified portfolio with a very large number of securities, and that the single index model holds.
Determine the projected sale price of the property at the end of year five if the going-out capitalization rate is 9%.
Lauren is a college sophomore majoring in business. This semester Lauren is taking courses in accounting, economics, management information systems, public speaking, and statistics. The sizes of these classes are, respectively, 340, 60, 35, 70, and 7..
Suppose that the average variance rate during the life of an option has a 0.20 probability of being 0.06, a 0.5 probability of being 0.09, and a 0.3 probability of being 0.12. The volatility is uncorrelated with the stock price. Estimate the value..
Stewart G. Griffin considers whether to purchase or rent a Time Machine. What is the annual worth of the purchase 5% interest.
A company forecasts free cash flow in one year to be -$10 million and free cash flow in two years to be $20 million. After the second year, free cash flow will grow at a constant rate of 4 percent per year forever. If the overall cost of capital is 1..
A problem with swaps is the lack of standardized contracts, which limits the development of a secondary market. Paying executives with stock options encourages them to take less risk. Risk management makes sense for firms directly engaged in activiti..
On completion of her introductory finance? course, Marla Lee was so pleased with the amount of useful and interesting knowledge she gained that she convinced her? parents, who were wealthy alums of the university she was? attending, to create an endo..
A one-year call option on a stock with strike price of $45 cost $5 and a one-year put option on a stock with strike price of $35 cost $3. A trader shorts two put options and shorts one call option. What is the breakeven stock price, below which the t..
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