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You plan to make 5 deposits of $1,000 each, one every 6 months, with the first payment being made in 6 months. You will then make no more deposits. If the bank pays 6% nominal interest, compounded
What is the break-even level of output? What is the level of profits at sales of 9,000 units?
A corporation enters into a $35 million notional principal plain vanilla interest rate swap. The swap calls for the corporation to pay a fixed rate and receive a floating rate of LIBOR.
P & P Communications has a weighted average cost of capital of 9.5 percent. The company's cost of equity is 15.5 percent, and its pretax cost of debt is 8.5 percent. The tax rate is 34 percent.
The stock sells for $32 a share. What is the estimated cost of equity using the average of the CAPM approach and the dividend discount appr
The firm is analyzing a new project which requires an initial cash outlay of $420,000 for equipment. The flotation cost is 9.6 percent for equity and 5.4 percent for debt. What is the initial cost o
Discuss the concept of duration, its uses and limitations, and precisely how it measures risk.
What is the return on stockholders' equity for a firm with a net profit margin of 4.9 percent, sales of $350,000, an equity multiplier of 1.6, and total assets of $215,000?
Given the following costs related to the pro- posed project, explain whether each would be treated as a sunk cost or an opportunity cost in developing the relevant cash flows associated with the pro
Working capital is expected to increase by $5000 at the inception of the project, but this amount will be recaptured at the end of year five. What is the incremental free cash flow for year one? Wha
The premiums of an insurance policy are $50 per quarter, payable at the start of each quarter. If a policyholder wants to pay one year's premiums in advance, how much should she pay, given interest
What is the present value of the free cash flows projected during the next 4 years? Round your answer to two decimal places at the end of the calculations. Enter your answer in millions. For example
Suppose that the Fisher hypothesis holds for an economythat has an expected real interest rate of 2%. For each of the expected inflation rates of 0, 2, 4, 6 and 8 percent, calculate the nominal int
Find the yield to maturity of the following securities:
Calculate both the marginal reserve requirement (the additional amount of required reserves per dollar of additional transaction deposits) and the average reserve requirement (required reserves divi
Suppose that the CAPM is a good model of risk in the stock market. Suppose also that the average excess return on stocks is 10% and that the risk free interest rate is 1%. What would you expect to b
The theory of comparative advantage owes it origins to Ben Bernanke as described in his book The Wealth of Bankers.
The recapture of net working capital at the end of a project will
Day Labor Company had depreciation expenses of $108,905, interest expenses of $78,112, a tax rate of 30%, and an EBIT of $1,254,338 for the year ended June 30, 2011. What is the cash coverage ratio
In addition, the company had an interest expense of $118,000 and a tax rate of 34 percent. (Ignore any tax loss carryback or carryforward provisions). What is its operating cash flow?
A project that provides annual cash flows of $24,000 for nine years costs $110,000 today. Is this a good project if the required return is 8 percent? What if it's 20 percent? At what discount rate
Its Current Liabilities have a book and market value of $300,000 and the Long-term Liabilities have book value of $700,000 with market value of $600,000. What is the difference between the book valu
Discuss the various issues that must be considered in selecting an investment banker for an IPO. Which type of placement is usually preferred by the issuing firm?
How would you explain the fact that the underwriting spread on IPOs averages about 7 percent of the offering price, whereas the underwriting spread on a seasoned offering of common stock averages le
What are American Depositary Receipts (ADRs), and why have they proven so popular with U.S. investors?