Examine the following book-value balance sheet for University Products, Inc. What is the capital structure of the firm based on market value? The preferred stock currently sells for $15 per share and the common stock for $20 per share. There are one million common shares outstanding. BOOK VALUE BALANCE SHEET
With a 10% discount rate, the present value factors of $1 received at the end of each of the next three years are 0.909 and 0.751, respectively. Given these values, the present value of a $1,000 (par) 3-year corporate bond with an 8% coupon rate is?
4. In a world in which your investment choices consist of a risky portfolio and a risk-free asset, the expected return on the former is 15%, and the return on the latter is 10% (which is also your borrowing rate). The standard deviation of the return on the risky portfolio is 20%. If your complete portfolio has a standard deviat
34.. Given the following information, calculate Retained Earnings for 2004. Dividend Payout Ration = 40% 2004 Net Income = $5,150 2003 Retained Earnings = $12,800 35. Firms should finance long-term assets with short-term financing and short-term assets with long-term financing. TRUE FALSE 36. Calcula
I purchased a $25,000 bond @ 104 as a long term investment on January 1, 2007. The bond pays interest annually on each Dec 31 and matures Dec 31, 2009. Assuming a straight line amortization, what is net amount of cash received from this investment over its life? How much cash is collected each year? How much premium will be
A corporation has a $1,000 par value bond outstanding that was issued for 30 years 5 years ago at a coupon rate of 15%. The yield on similar bonds is now 12%. What is the price and what is it yielding if it is selling for $938.81?
A Sprint bond has 5 years until maturity a coupon rate of 8 percent, and sell for 2,000. a. What is the current yield on the bond? b. What is the yield to maturity?
4. Risk and return Your uncle would like to restrict his interest rate risk and his default risk, but he would still like to invest in corporate bonds. Which of the possible bonds listed below best satisfies your uncle's criteria? AAA bond with 10 years to maturity. BBB perpetual bond. BBB bond wit
Bond Prices and years to maturity: The Nickelodeon Manufacturing Co. has a series of $1000 par value bonds outstanding. If the required rate of return on bonds is 10%, what is the current price of: a) the bonds with 3 years to maturity?
The Nickelodeon Manufacturing Co. has a series of $1000 par value bonds outstanding. Each bond pays interest semi-annually and carries an annual coupon rate of 7%. Some bonds are due in three years while others are due in 10 years. If the required rate of return on bonds is 10%, what is the current price of: a) the bonds wi
The probability that the economy will contract is 0.2. The probability of moderate growth is 0.6, and the probability of a rapid expansion is 0.2. If the economy contracts, you can expect a return on your portfolio of 5 percent. With moderate growth, your return will be 8 percent. If there is a rapid expansion, your portfolio wi
Finance Problems on Bracket creep, After tax returns, Forecasting and ratio changes, Expected Inflation, Bond value-semiannual payment,
1.Which of the following statements is most correct and explain why? a. Indexing tax brackets reduces the extent of 'bracket creep' b. Bonds issued by a municipality such as the city of Miami would carry a lower interest rate than bonds with the same risk and maturity issued by a private corporation such as Florida Power & L
For all the following multiple choice questions use the following information: ABC Co. issued a bond some time ago with a coupon rate of 10%. The market interest rate was then 11%. The bond is not due to mature for some time. The current market interest rate is 9%. (Your answer must be supported by a concise explanation.)
1.You expect to retire in 15 years. Based on your projections, you believe you can afford to put away $1,000 per month over that time. How much will you have at retirement? After retirement you expect to live for another 20 years, if you already had $200,000 in your account when you started putting away the $1,000 per month,
Bonds, bond price, hedging using T-bond futures,hedging using forward contract, duration, change in price of bonds.
1 Village Bank has $240 million of assets with a duration of 14 years and liabilities worth $210 million with a duration of 4 years. In the interest of hedging interest rate risk, Village Bank is contemplating a macrohedge with interest rate futures contracts now selling for 102-21. If the spot and futures interest rates move to
(6-2) The values of outstanding bonds change whenever the going rate of interest changes. In general, short term interest rates are more volatile than long term interest rate. Therefore, short term bond prices are more sensitive to interest rate changes than are long term bond prices. Is this statement true or false? Explain.
1. Valuing a bond and valuing a stock: a. Bond valuation-what is the PV or the appropriate selling price of a 30 year bond which has a 10% coupon, paid annually, and has a 10 years till maturity, during a time when market interest rates are 5% b. Using the dividend discount model determine the appropriate market price for a
My company has a bond outstanding with a par value of $1000, an annual interest payment of $110, a market price of $1200 and a maturity in 10 years. Determine the following: a. Coupon rate b. Current yield c. Approximate yield to maturity
My company's bonds are currently selling for $1,157.75 per $1,000 par-value bond. The bonds have a 10% coupon rate and will mature in 10 years. What is the approximate yield to maturity of the bonds?
If the required rate of return on both bonds is 12 percent compounded semi-annually, what is the current price of Bond M and Bond N.
If the required rate of return on both bonds is 12 percent compounded semi-annually, what is the current price of Bond M and Bond N. See attached file for full problem description.
1) Classifying liabilities as either current or long-term helps creditors assess: A) The extent of a firm's liabilities. B) The relative risk of a firm's liabilities. C) The degree of a firm's liabilities. D) The amount of a firm's liabilities. 2) Bond X and bond Y are both issued by the same company. Each of the b
Maharlika Corporation issued a 10-year $1.5 million 6% bond. Interest payments will be on a semi-annual basis. The effective rate at the point of sale, January 1, 2005, is 8% and Maharlika closes its accounting records on December 31 of each year. Instructions: Prepare the journal entries for: (a) to record the issuanc
A money manager is holding the following portfolio: Stock Amount Invested Beta 1 $300,000 0.6 2 300,000 1.0 3 500,000 1.4 4 500,000 1
You are comparing the prices of a bonds issued by two corporations. NV Technologies has a 8%, 15- year bond outstanding, trading at par. GEV Technologies has the same bond rating as NV Technologies and has a 7.5% bond, trading at 5% below par. What is the maturity of GEV's outstanding bond?
1. Burns Fire and Casualty Company has $1000 par value bonds outstanding at 11% interest. The bonds will mature in 20 years. Compute the current price of the bond if the present yield to maturity is at 6%. (Interest payments are on an annual basis) 3. Analogue Technology has preferred stock outstanding that pays a $9 annual d
Problem is attached. Review problem-time value of money applications. Use the appropriate factors from Table 6-4 or Table 6-5 to answer the following questions: Required: a) Wright Co.'s common stock is expected to have a dividend of $5 per share for each of the next 10 years, and it is estimated that the market value p
1. The $: ? exchange rate is $1 = ?0.85, and the SFr/? exchange rate is SFr 1 = ?0.75 What is the $/SFr exchange rate? 2. Suppose that the forward ask price for March 20 on euros is $0.9227 at the same time that the price of IMM euro futures for delivery on March 20 is $0.9045. Can an arbitrageur profit from this situation? W
First Tennessee Utility Company faces increasing needs for capital. Fortunately, it has an Aa2 credit rating. The corporate tax rate is 36 percent. First Tennessee's treasurer is trying to determine the corporation's current weighted average cost of capital in order to assess the profitability of capital budgeting projects. Hist
Chapter 16 (Block−Hirt: Foundations of Financial Management) Can you assist with Problem 16-6 in the attachment
6. Sanders & Co. pays a 12 percent coupon rate on debentures that are due in 20 years. The current yield to maturity on bonds of similar risk is 10 percent. The bonds are currently callable at $1,060. The theoretical value of the bonds will be equal to the present value of the expected cash flow from the bonds. This is the norma
I am using Excel to solve this one with the PV function. I am thinking that there is no difference in the current market prices for these, but I am not sure how to explain why. I believe it is because they have coupons and the interest is not compounding. Thanks Assume that McDonald's and Burger King have similar $1,000
Explain why the relationship between a bond's yield and its coupon rate determines whether a bond will be price at par, at a premium or at a discount