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The conversion ratio for XYZ convertible debenture is 20. You buy a $1000 of this bond at $100 premium. What is the parity price of XYZ stock?
Jones Corp's EBITDA last year was $385,000 (= EBIT + depreciation + amortization), its interest charges were $10,000, it had to repay $25,000 of long term debt, and it had to make a payment of $20,0
Franklin Corporation is planning to issue new 20-year bonds. Initially, the plan was to make the bond non-callable. If the bond were made callable after 5 years with a 5% call premium, how would thi
Problem: Discuss the relationship between the coupon rate (original interest rate at time of issue) on a bond and its security provisions.
For the Morton Inc Company, the average age of accounts receivable is 60 days, the average age of accounts payable is 45 days, and the average age of inventory is 72 days. Assuming a 365-day year, w
Problem: Which is the best approach to common stock valuation and why?
Discuss the relationship between bond prices and interest rates. What impact do changing interest rates have on the price of long-term bonds versus short-term bonds?
The firm's beta is 1.2, the risk free rate is 5%, and the market risk premium is 7%. The tax rate is 34%. Calculate the WACC?
a. What is the bond’s price today? b. What will the bond’s price be in six months after the next coupon is paid? c. What is the total (six month) return on this bond?
Suppose the Federal Reserve surprises everyone by sharply raising the federal funds rate. Explain how this action is likely to affect the nominal interest rates on (i) three-month Treasury bills (ii
Midland Oil has $1,000 par value bonds outstanding at 8 percent interest. The bonds will mature in 25 years. Compute the current price of the bonds if the present yield to maturity:
Prepare entries to record issuance of bonds, payment of interest, and amortization of bond discount using effective interest method.
The primary objective of business financial management is to a. maximize total corporate profit. b. maximize net income. c. minimize the chance of losses. d. maximize shareholder wealth (i.e. stock pr
A bond recently issued matures in 15yrs. They have a par value of $1000 and an annual coupon of 6%. If the current market interest rate is 8% at what price should the bonds sell?
What does the interest paid each year on the US debt mean? Compare this feature to that of a household and a hypothetical household's debt load?
Problem: Carol Chastain purchases a one-year discount bond with a face value of $1,000 for $862.07. What is the yield of the bond?
Laser Electronics Co. has $30 million in 8% convertible bonds outstanding. Conversion rate is 50; the stock price is $17; and the bond matures in 15 years. The bonds are currently selling at a conve
Bennifer Jewelers recently issued ten-year bonds that make annual interest payments of $50. Suppose you purchased one of these bonds at par value when it was issued. Right away, market i
A $1,000 par value bond sells for $1,216. It matures in 20 years, has a 14 percent coupon, pays interest semiannually, and can be called in 5 years at a price of $1,100. What is the bond's YTM and Y
One year from now, how much value creation is expected from the expansion? How much value is expected for stockholders? Bondholders?
If you require an 11.0% nominal yield to maturity on this investment, what is the maximum price you should be willing to pay for the bond?
Imagine you have $1000 to invest. Pick a treasury retail security you would buy and explain the structure of the security and your rationale for purchasing it.
Should the government/private citizens be concerned about the size of the national debt? Do you think the country would be better off with zero debt?
One year from today you exchange your Canadian dollars for US dollars at a spot rate of 0.8746. What is the effective return on your investment?
Q1. What is the fair price of the bond? In order to be able to pay the total face value back in 10 years, the company decides to use a sinking fund in which it will make semi-annual payments