• Q : Distinction between premium bond and a discount bond....
    Finance Basics :

    What is the difference between a premium bond and a discount bond? What three attributes are most important in determining an issue's price volatility?

  • Q : Call feature and a sinking-fund provision....
    Finance Basics :

    What is the difference between a call feature and a sinking-fund provision? Briefly describe the three different types of call features. Can a bond be freely callable but non-refundable?

  • Q : Evaluating expected return on a stock....
    Finance Basics :

    What is the expected return on a stock with a beta of 0.8, given a risk free rate of 3.5% and an expected market return of 15.5%?

  • Q : Determining the dividend payout ratio....
    Finance Basics :

    Paul Inc. forecasts a capital budget of $725,000. The CFO wants to maintain a target capital structure of 45% debt and 55% equity, and it also wants to pay dividends of $500,000. If the company foll

  • Q : Determining the ex- dividend price....
    Finance Basics :

    New IRS regulations require that taxes be withheld when the dividend is paid. Lee Ann sells for $ 75 per share, and the stock is about to go ex dividend. What do you think the ex- dividend price wil

  • Q : What are erosion costs....
    Finance Basics :

    What are erosion costs? Provide one real-life example of an erosion cost for a project. Should erosion costs be included as project cash flows? Why or why not? Explain your rationale.

  • Q : Determining the current cost of a bond....
    Finance Basics :

    Perpetual Ltd. has issued bonds that never require the principal amount to be repaid to investors. Correspondingly, Perpetual must make interest payments into the infinite future. If the bondholders

  • Q : Determining stock expected rate of return....
    Finance Basics :

    Jersey common stock paid $2.50 in dividends last year (D0). Dividends are expected to grow at a 10% annual rate forever. If Jersey's current market price is $50, what is the stock's expected rate of

  • Q : Determining account balance at the end of tenth year....
    Finance Basics :

    At the end of the sixth year, the account balance was transferred to a bank paying 10%, and annual deposits of $6,000 were made at the end of each year from the seventh through the tenth years. What

  • Q : Us dollar-canadian dollar exchange rate....
    Finance Basics :

    6-month U.S. securities have an annualized return of 6.5% and a periodic return of 3.25%. If interest rate parity holds, what is the U.S. dollar-Canadian dollar exchange rate in the 180-day forward

  • Q : Annually compounded rate of return on investment....
    Finance Basics :

    Thirty-five years ago, you invested $1,000 in a retirement fund. Today the fund is worth $130,000. What has been your annually compounded rate of return on this investment?

  • Q : Ratio analysis....
    Finance Basics :

    Assuming a 360-day year, calculate what the average investment in inventory would be for a firm, given the following information in each case.

  • Q : Weighted cost of capital for the coming year....
    Finance Basics :

    The current market value of Alpha's stock is $30. If the firm has a marginal tax rate of 40 percent, what is its weighted cost of capital for the coming year?

  • Q : Bond-yield-plus-risk-premium method....
    Finance Basics :

    The firm's policy is to use a risk premium of 2.8 percentage points when using the bond-yield-plus-risk-premium method to find ks. The firm's marginal tax rate is 40 percent.

  • Q : Calculating firm weighted average cost of capital....
    Finance Basics :

    The bonds carry a 7 percent coupon, pay interest semiannually, and mature in 7.5 years. The bonds are selling at 98 percent of face value. The company's tax rate is 34 percent. What is the firm's we

  • Q : Amount of the annual interest tax shield....
    Finance Basics :

    These bonds have a 7.5 percent coupon, pay interest semiannually, and have a current market price equal to 98.6 percent of face value. The tax rate is 39 percent. What is the amount of the annual inte

  • Q : Nature of the basis risk in the long hedge....
    Finance Basics :

    Determine the effective price at which you purchased your sugar. How do you account for the difference in amounts for the spot and hedge positions? Describe the nature of the basis risk in the long

  • Q : Determining the required after-tax return....
    Finance Basics :

    If 9% after-tax is the investor's required return, what before-tax rate would the domestic bond need to pay to provide the required after-tax return?

  • Q : Determining the incremental revenue....
    Finance Basics :

    What will be the incremental revenue generated if the rental company decides to accept the price offered by the group?

  • Q : Standard deviation of the resulting portfolio....
    Finance Basics :

    what are the portfolio weights for doing so? Suppose that the correlation coefficient between asset A and asset B is zero, what is the standard deviation of the resulting portfolio?

  • Q : Stock and debt basis....
    Finance Basics :

    How much of the $25,000 ordinary loss allocated to Parker clears the tax basis hurdle for deductibility in 2010? What is Parker's stock and debt basis at the end of 2010? What is Parker's stock and de

  • Q : Weighted average contribution margin per unit....
    Finance Basics :

    Carlos sells in a mix of 2 units of A, 3 units of B and 5 units of C. What is the weighted average contribution margin per unit for Carlos?

  • Q : Difference between this bond ytm and its ytc....
    Finance Basics :

    Assume that no costs other than the call premium would be incurred to call and refund the bonds, and also assume that the yield curve is horizontal, with rates expected to remain at current levels o

  • Q : Joint cost and additional processing....
    Finance Basics :

    Good Earth Products produces orange juice and candied orange peels. A 1,000-pound batch of oranges, costing $400, is transformed using labor of $40 into 100 pounds of orange peels and 300 pints of j

  • Q : Differences between the two companies....
    Finance Basics :

    Explain what these measures mean and how they help the reader understand the differences between the two companies.

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