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Explain default risk, inflation risk, and interest rate risk as they relate to bonds. Assume you are the advertising manager of your local bank. Which rate do you prefer to advertise on monthly-comp
What is the company's federal income tax bill for the year? Assume the firm receives an additional $1 million of interest income from some bonds it owns. What is the tax on this interest income?
The Johnson and Baker Company increased investments in foreign securities by $ 120,000, funded fixed asset acquisitions by $ 1,500,000, and sold $ 90,000 of long-term debt. Also, the firm had a net
Bond Corporation issued a R1 000 par value bond bearing a coupon rate of 16% and paying coupons semi-annually.This bond has three years remaining to maturity, and is currently priced at R940 per bon
Explain what happens to a company's cost of capital when the company has no debt, when it first takes on some debt, and as it increases the level of debt.
By how much will the net income change as a result of the change in depreciation? The company uses the same depreciation calculations for tax and stockholder reporting.
What is the net investment for an extruder that costs $42,000, if shipping costs are $1,500 and installation is $4,800? Assume this efficient machine is replacing an older extruder with a book and m
Calculating Costs and Break-Even night Shades Inc. manufactures biotech sunglasses. The variable material cost is $5.43 per unit, and the variable labor cost is $3.13 per unit.
Your firm has the following balance sheet statement items: total current liabilities of $805,000; total assets of $2,655,000; fixed and other assets of $1,770,000; and long-term debt of $200,000. W
DayTop is rated A and can borrow money at 5%. The risk-free rate is 4.5% and the market risk premium is 4%; the corporate tax rate is 40%. Estimate the cost of capital for DayTop Inns.
What were total production costs? What is the marginal cost per pair? What is the average cost?
What is a strategy for managing risk? What are some potential future risks? How would you develop strategies to mitigate these risks?
The Swell Computer Company has developed a new line of desktop computers. It is estimated that the cash returns generated by the new product line will be $800,000 per year for the next five years, a
What is a global risk management trend? How may this trend evolve? What potential effect might this trend have on risk management?
Tanya is trying to prepare her loan amortization schedule for the renovation of her bed-andbreakfast facility. Her banker is quoting her an interest rate of 12% for four years. The loan amount is $2
The new lathe would cost $500,000. The firm's marginal tax rate 40 percent. Determine the net investment required to purchase the new lathe, if the old lathe is sold for $100,000.
Construct Taunton's balance sheet showing the capitalized lease and the related lease obligation.
What is the value of the company's equity? What is the debt to value ratio? What is the equity value and debt to value ratio if the company's growth rate is 5 percent?
In 2002, John acquires property with a FMV of $500,000. He gifts the property to Jane in 2003 when it has a FMV of $1 million. Jane dies in 2003 and leaves the property to John's wife. What value wi
Grill Works and More has 7 percent preferred stock outstanding that is currently selling for $50 a share. The market rate of return is 10 percent and the firm's tax rate is 33 percent. What is the f
Mary creates an irrevocable trust with Crummey withdrawal powers. Sam, her husband, is the Trustee of the trust. Mary's 3 children are the trust beneficiaries. What is the maximum amount of annual e
Estimate the value of Nabor Industries' entire company by using the free cash flow valuation model. Use your finding in part a, along with the data provided above, to find Nabor Industries' common sto
A Treasury bond that matures in 10 years has a yield of 4%. A 10-year corporate bond has a yield of 9%. Assume that the liquidity premium on the corporate bond is 0.35%. What is the default risk pre
The company just paid $1.40 per share as their annual dividend. The dividends have been increasing by 3 percent annually and are expected to continue doing so. What is the cost of equity for Sundial
What range of one-year forward prices of gold does the trader have no arbitrage opportunities?