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Rate-Capped Swaps- Bull and Finch Company wants a fixed-for-floating swap. It expects interest rates to rise far above the fixed rate that it would pay and to remain very high until the swap maturit
Use of Interest Rate Swaps- Explain why some companies that issue bonds engage in interest rate swaps in financial markets. Why do they not simply issue bonds that require the type of payments (fix
Equity Swap- Explain how an equity swap could allow Marathon Insurance Company to capitalize on expectations of a strong stock market performance over the next year without altering its existing por
Fixed-for-Floating Swaps- North Pier Company entered into a two-year swap agreement, which would provide fixed-rate payments for floating-rate payments.
Decision to Hedge with Interest Rate Swaps- Explain the types of cash flow characteristics that would cause a firm to hedge interest rate risk by swapping floating-rate payments for fixed payments.
Hedging with Put Options- Why would a financial institution holding the stock of Hinton Co. consider buying a put option on that stock rather than simply selling it?
Speculating with Stock Options- The price of Garner stock is $40. There is a call option on Garner stock that is at the money with a premium of $2.00.
Gamma Medical's stock trades at $140 a share. The company is contemplating a 3-for-2 stock split. Assuming that the stock split will have no effect on the market value of its equity, what will be th
Axel Telecommunications has a target capital structure that consists of 70% debt and 30% equity. The company anticipates that its capital budget for the upcoming year will be $1,000,000.
Hedging Interest Rate Risk- Assume a savings institution has a large amount of fixed-rate mortgages and obtains most of its funds from short-term deposits.
Northern Pacific Heating and Cooling Inc. has a 6-month backlog of orders for its patented solar heating system. To meet this demand, management plans to expand production capacity by 25% with a $20
Assuming that the company maintains the same payout ratio, what will be its stock price following the recapitalization? Assume that shares are repurchased at the price calculated in Part a. Round yo
Your company is considering the replacement of an old delivery van with a new one that is more efficient. The old van cost $40,000 when it was purchased 5 years ago.
Alternatively, Boles could borrow from its bank on a 12-percent discount interest basis. What is the EAR on the lower cost of source?
A company that makes shampoo wants to test whether the average amount of shampoo per bottle is 16 ounces. The standard deviation is known to be 0.20 ounces.
Ebay currently has a beta of one. Additionally, the rate of return in the markethas been .12 historically, and the risk premium is .16. You know that Ebay will grow 800% in the next one year and aft
We receive a $200,000 mortgage from the Gensinger bank for 100 years. A VP at the bank, Robert tells us to fully amortize the mortage we need to pay $2,00 monthly. First, we would like to know how m
Jamie's Cupcakes has a new project that will require the company to borrow $3,000,000. Jamie has made an agreement with three lenders for the needed financing. Bank 1 will give $1,250,000 and wants
Describe the variables that were presented. What level of measurement (nominal, ordinal, interval, ratio) was used? Explain why you think these levels are appropriate.
What would happen to the break-even point if the selling price was raised to $34 but variable costs rose to $22 a unit? Round your answer to the nearest whole.
A company's fixed operating costs are $650,000, its variable costs are $2.45 per unit, and the product's sales price is $4.25. What is the company's breakeven point; that is, at what unit sales volu
Firms HL and LL are identical except for their leverage ratios and the interest rates they pay on debt. Each has $18 million in invested capital, has $3.6 million of EBIT, and is in the 40% federal-
A six-year US government bond (i.e. face value is $1,000) makes annual coupon payments of 5% and offers a yield of 3% annually compounded. Suppose that one year later the bond still yields 3%.
You wrote a piece of software that does a better job of allowing computers to network than any other program designed for this purpose.
If the plan in Part d is implemented, by how much will the company's earnings per share be diluted? Round your answer to the nearest cent. Do not round intermediate calculations.