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Calculate your current profit, and your maximum possible gain and loss. Now assume that you buy a put option to protect your position. Your put has a strike price of $69 per share, maturity of 6 mont
Use Black Scholes option valuation to find the value of a put option with a strike price of $20, a risk free rate of 8%, variance of returns = 36%, an expiration date six months from now, given tha
Malkin Corp. has no debt but can borrow at 6.5%. The firm's WACC is currently 10%, and there is no corporate tax.
Consider a bond with a 6.1 percent coupon rate and a yield to call of 7 percent. The bond currently sells for $1,103. If the bond is callable in 5 years, what is the call premium of the bond?
You bought a share of Bavarian Sausage stock for $46.50 at the beginning of the year. During the year the stock paid a $2.75 dividend and at the end of the year it trades at $44.75. What is the tota
A company has a bond issue outstanding that pays $150 annual interest plus $1000 at maturity. The bond has a maturity of 10 years. Compute the value of the bond when the interest rate is 5%, 9%, an
Suppose a corporation's bonds have a current market price of $1400. The bonds have a 13% annual coupon rate, a $1000 face value, and 10 years left until maturity. The bonds may be called in 5 years
Compute the market price of the bonds if interest is paid annually. Compute the market price of the bonds if interest is paid semiannually.
Assume the best case scenario NPV is 50% higher than the base case and assume the worst case scenario NPV is 25% lower than the base case. Both the best case scenario and the worst case scenario hav
Truman Industries is considering an expansion project. The necessary equipment could be purchased for $9 million, and the project would also require an initial $3 million investment in net working c
Six Twelve is considering opening up a new convenience store in downtown New York City. The expected annual revenue is $800,000. To estimate the increase in working capital,
Your boss asks you to compute the company's cash conversion cycle. Looking at the financial statements, you see that the average inventory for the year was $126,300, accounts receivable were $97,900
Healthy Potions, Inc., a pharmaceutical company, bought a machine that produces pain-reliever medicine at a cost of $2 million five years ago.. The machine has been depreciated over the past five ye
Using agency theory concepts, explain how restrictive covenants that forbid leases and liens on a firm's assets might cause the firm to achieve a higher rating on its bonds than would be possible wi
What characteristic of absorption costing caused the drop in net operating income for the second quarter and what could the controller have said to explain the problem?
You have built a model for a company you are analyzing, but realize that you mistakenly entered $100 million in depreciation instead of the correct value of $110 million. Assuming a 20% tax rate, w
You estimate that Salt Lake has a 95% probability of paying you on time, which is in three months, and a 5% probability of paying nothing. If the opportunity cost of funds is 18% per year, what is t
Winegartner Cosmetics is setting up a line of credit at its bank for $5 million for up to two years. The interest rate is 5.875 percent and the loan agreement calls for an annual fee of 40 basis poi
Morgan Contractors borrowed $1.75 million at an APR of 10.2 percent. The loan called for a compensating balance of 12 percent. What is the effective interest rate on the loan?
Joe purchased 800 shares of Robotics Stock at $3 per share on 1/1/09. Bill sold the shares on 12/31/09 for $3.45. Robotics stock has a beta of 1.9, the risk-free rate of return is 4%, and the market
Assess the short-term and long-term effects of the limited capital that is currently available, especially since banks are increasingly reluctant to make loans. Speculate on how long the capital sho
What coupon interest rate, and dollar coupon, must the company set on the bonds with warrants if they are to clear the market?
What is the weighted average cost of capital if the after tax cost of debt is 9% and the cost of equity is 14%? A. B. C. D. E. 7.98% 10.875% 11.000% 12.125% It is impossible to determine WACC withou
Distinguish between national approaches and incremental approaches to budgeting.
Present values are negatively impacted by higher interest rates. How does compounding compare with discounting? How does the future value of an annuity compare with the future value of a lump sum?