1. Assume that you are interested in a 4.25 percent coupon corporate bond that has eighteen years left to maturity, but can be called back in four years for a premium of one year’s worth of interest payments. If coupon payments are semiannual, and the bond is currently selling for $1,075, what is the yield you could expect on this bond if you held it until it can be called? ?
2. Deere & Co. list the following information in their financial statements: sales of $200 million, current assets of $25 million and fixed assets of $50 million. Calculate the fixed asset turnover and total asset turnover for Deere & Co. What does this suggest about their asset efficiency?
3. Suppose you are considering an investment in Amazon.com. Amazon's balance sheet lists the following: current assets of $450,000, fixed assets of $950,000, current liabilities of $275,000, long-term liabilities of $550,000, and total shareholders' equity of $575,000. Calculate the debt ratio, equity multiplier, and debt-to-equity ratio for Amazon.com. What do these ratios suggest about the leverage of Amazon?
4. Sears has a $100 million 30-year bond issue currently selling for 103 percent of par that carries a coupon rate of 5 percent, which is paid annually. What is Sears’s before-tax component cost of debt?