See attached files. AMR, the parent firm of American Airlines, found its profitability had improved a few years ago. Several years prior, AMR had issued privately about 1.1 billion of convertible preferred stock. As you know, interest is tax deductible whereas dividends are not. AMR decided to offer the preferred stockholders
A long-term debt issue in the amount of $200 million calls for mandatory redemption payments of $30 million each at the end of years 7, 8, and 9 and repayment of the remaining balance (called the balloon) at the end of year 10. Calculate the issue's average life.
Please read this statement and answer the practice questions. Smaller companies treat short-term interest-bearing debt as long-term debt and they also include it in the capital structure to estimate the overall cost of capital of the company." 1.why do you think small companies treat short term debt this way? 2. Do you th
Tom Sander is a loan officer with Miami National Bank. The bank typically charges 8% APR on loans with a compensating balance requirement of 10%. In order to be competitive with other banks, Sanders will adjust the loan rate based on a customer's compensating balance level. A customer maintaining a balance greater than 10% will
Sample Finance Quiz Questions (simple/compound interest, investments compounded annually, and more...)
6. A financially wise individual would prefer a loan based on __________ interest and an investment earning __________ interest. a. compound; compound b. compound; simple c. simple; compound d. simple; simple e. complex; compound 8. Over time, the future value of $1,000 invested today at 6 percent, compoun
Integrated Case 6-21: Morton Handley & Company Interest rate determination. Maria Juarez is a professional tennis player, and your firm managers her money. She has asked you to give her information about what determines the level of various interest rates. Your boss has prepared some questions for you to consider. a. Wh
1. Stockbridge Industries has a total asset turnover ratio of 4.1x and net annual sales of $49.2 million. If Stockbridge has $6 million of total debt on its balance sheet, what is the firm's debt ratio? 2. Stockbridge pays 10% annual interest on its outstanding debt. If the firm's total operating costs (including deprecia
Aton can choose from two loan offers: $12,000 at 8% simple interest for 9 months, or a $12,000 9-month discounted loan at 7% discount. Based on the actual interest paid and the true rate on the discounted loan, which of the two loan offers will Aton CHOOSE? Explain your answer.
Anna loaned her friend Jason $1,000 for 6 months at 6% simple interest. What is the future value of the loan and how much finance charge will Jason pay?
Sherman agreed to deposit $4,450 in an account paying 16% simple interest per year for 60 days. If she made the deposit on February 25, determine (a) the date of the end of the term of the investment, and (b) the ordinary interest Sherman will earn.
If I borrow $115,700 at 10.5% compounded monthly for 25 years. If I make all the payments (300) how much interest would I pay? Am I suppose to use just the simple calculation of I=PRT or am I forgetting something to make it compounded?
Medvedev Inc., issued $10,000,000 of short-term commercial paper during the year 2006 to finance construction of a plant. At December 31, 2006, the corporation's year-end, Medvedev intends to refinance the commercial paper by issuing long-term debt. However, because the corporation temporarily has excess cash, in January 2007
Describe how interest based bargaining is different from other techniques.
When the Fed tightens monetary policy during business expansions, the ________ loanable funds shifts to the ______. A) demand for, right B) demand for, left C) supply of, left D) supply of, right Interest rates have fallen since the early 1980s because the A) federal deficit has declined B) federal deficit has in
Scenario: As a homeowner I need to take out a home equity loan for home repairs. Borrowing $10,000 how much will it cost in interest to pay the loan off in 5 years if compounded monthly. What is the difference in paying the loan off at the end of 5 years if simple interest is used. I am also looking for a credible loan agen
Single rate versus departmental cost drive rate - Cutting and Assembly: Plantwide cost driver and departmental cost driver rates
Two product departments within a company: Cutting and assembly. The company has been using a single predetermined cost driver rate based on plantwide direct labor hours. That is, the plantwide cost driver rate is computed by dividing plantwide support costs by total plantwide direct labor hours. The estimates for support cost
Bingo Corporation is determining whether to support $150,000 of its permanent current assets with a bank note or a short-term bond. The firm's bank offers a two year note where the firm will receive $150,000 and repay $175,000 at the end of two years. The firm has the option to renew the loan at market rate. Alternatively, Bingo
The New Millenium Manufacturing Company produces two products. One is a millenium surf kit. The other product is a professional surf-board (short board) used in world class surfing competition. Most of the sales come from the millenium surf product, but recently sales of professional boards have been increasing. The following in
I need help on this assignment. I have to answers the following questions based on a chosen scenario. The selected scenario is: A manufacturing organization considering expansion to India or Brazil Prepare a proposal in which you select the optimal financing and investment strategy for your scenario. The selected scenar
Les Fleurs, a boutique in Paris, France, had the following accounts in its accounting records at December 31, 20X2 (amounts in Euros, denoted as "E")
Les Fleurs, a boutique in Paris, France, had the following accounts in its accounting records at December 31, 20X2 (amounts in Euros, denoted as "E") Purchases..................... E250,000 Freight In.................. E8,000 Sales discounts............. 4,000 Purchase returns........ 7,000 Inventory Sales.......
Which of the following financial assets would be most susceptible (vulnerable) to a decline in value if interest rates increased? a. a short term fixed income financial asset (ex. short term bond) b. a long term fixed income financial asset (ex. long term bond) c. a long term variable interest rate income financial asset
7 As bond market interest rates increase, the value (i.e., price) of a fixed coupon interest rate bond (i.e., a typical corporate bond) a. does not change b. increases c. decreases d. insufficient information to answer this question e. None of the above or insufficient information 8 In an efficient capital market a
12 Assuming you will leave your money in the bank for the entire year, which of the following interest rate alternatives would you prefer? a. 11.75 % compounded semi-annually b. 11.75 % compounded quarterly c. 11.45 % compounded weekly d. 11.45 % compounded annually e. None of the above or insufficient information
86 If a tax paying firm pays $100,000 in interest what is the after tax interest cost for firm assuming they are in a 40% tax bracket? a. 100,00 since interest is paid after taxes are paid and thus there is no tax shield b. 40,000 since there is a tax shield on interest c. 60,000 since there is a tax shield on inter
Select two major currencies from the past year. What are similarities and differences between them? What have been drivers of each currency's performance? How do interest rate movements affect the overall value of currencies? (at least 200 word). please properly cite your references. thanks.
A company's 6% coupon rate,semiannual payment,$1,000 par value bond that matures in 30 years sells at a price of $515.16 .The company's federal-plus-state Tax rate is 40%.What is the firm's component cost of of debt for the purposes of calculating WACC(hint base your answer on nominal rate)
In 2006 Peggy Pink contributed property to a new partnership in return for a 50% interest in capital and profits. The property had a fair market value of $10,000, an adjusted basis of $6,000, and was subject to a $9,000 mortgage which was assumed by the partnership. What was Pink's basis in the partnership as a result of this co
If a firm goes from zero debt to successively higher levels of debt, why would you expect its stock price to rise first, then hit a peak, and then begin to decline?
On June 1, 2008, Mark Stevens received a 20% capital interest in Brown Associates, a partnership, in return for services rendered plus a contribution of assets with a basis to Stevens of $15,000 and a fair market value of $20,000. The fair market value of Steven's 20% interest was $38,000. How much is Steven's basis for his inte
Joseph wants to deposit $1,500 at year-end for 35 years at 8%. What will his result be? If Joseph deposits $1,000 at the end of each year for the next 5 years at 8% compounded annually, $1,500 at the end of years 6-10 at 8% compounded annually, and $2,000 at the end of years 11-35 at 5% compounded annually, how much would he