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Interest Rates and the Cost of Debt

How many U.S. dollars will you need in one year to fulfill your forward contract? Determine the expected amount of dollars to be paid by the Wake Forest Co. for the pesos in one year.

1. Implication of IRP. Assume that interest rate parity exists. You expect that the one-year nominal interest rate in the U.S. is 7%, while the one-year nominal interest rate in Australia is 11%. The spot rate of the Australian dollar is $.60. You will need 10 million Australian dollars in one year. Today, you purchase a one-yea

Why Verizon Has Always Had Higher Debt

Please explain the internet statement "Verizon has always had higher debt than some of its peers. There was some discussion about this inside the industry a few years ago when they were deploying their IPTV services (FiOS). Their technology was more expensive than AT&T's, which required more up-front capital to put fiber in the

Investment Account of Ames Interest in Nestlum

Ames owns 100% of Nestlum, Inc. Although the Investment in Nestlum account has a balance of $596,000, the subsidiary's 12,000 shares have an underlying book value of only $40 per share. On Jan 1, 2009, Nestlum issues 3,000 new shares to the public for $50 per share. How does this transaction affect the Investment in Nestlum acc

I6-44 - Prepaid Interest & other deductible items on a new home purchase loan

During the current year, Richard and Alisha, a married couple who use the cash method of accounting, purchased a principal residence for $320,000. They paid $40,000 down and financed the remaining $280,000 of the purchase price with a 30-year mortgage. At the closing, they also paid $500 for an appraisal, $500 for a title search

Governmental Funds Debt Capacity

A. Discuss how the debt capacity of a governmental entity is determined. b. Evaluate the effect of refunding or reorganizing existing debt obligations. c. Analyze various funding alternatives that can be used to support debt obligation. d. Describe how rating agencies evaluate governmental risk.

EAR, monthly payment, refinance mortgage

1) You have found three investments choices for a one-year deposit: 10% APR compounded monthly, 10% APR compounded annually, and 9% APR compounded daily. Compute the EAR for each investment choice. (Assume that there are 365 days in the year.) 2) Oppenheimer Bank is offering a 30-year mortgage with an EAR of 5 3/8%. If you pl

Breakeven analysis, Capital Structure

Problem 1: Mike Smith wanted to open up a baseball hat shop. He needs to know how many hats that must be sold in a year to break even. The stores fixed costs for the year are estimated at $85,000. He is planning on selling the hats for $20.00 a piece. His cost per hat is $10.50. a. Find the operating break

Abbey and Hayduke: Notes receivable with unrealistic interest rate are examined.

On December 31, 2005 Ed Abbey Co performed environmental consulting services for Hayduke Co. Hayduke was short of cash and Abbey Co agreed to accept a $200,000 zero interest bearing note due December 31, 2007, as payment in full. Hayduke is somewhat of a credit risk and typically borrows funds at a rate of 10%. Abbey is much m

Practice Quiz: contracts, surety vs. guarantor, deposit accounts and more

1. The City of Melonville hires Ace Construction Company to build its new City Hall. Integrity Insurance agrees to be liable for Ace's performance of its contract. The City of Melonville has Integrity and Ace both sign the contract which provides that Ace and Integrity will be "jointly and severally" liable for the performance.

Complete grade Level Savings Table

On the first day of 7th grade, your rich uncle, Mort, encouraged you to save $30 of your allowance each month. On the first day of 8th grade, you receive the following email from Uncle Mort. "I am proud that you have been saving. I will pay you 10% on the balance that you saved in 7th grade and 10% on the balance of your savings

Cost per unit-Activity based costing

See attached Excel file. A company manufacturers two products, K33 and K88. Estimated unit cost and production data as well as activity cost pools and cost drivers are in the attached file. How do I estimate the manufacturing cost per unit of each product if support costs are assigned to products using activity based co

Lee Consulting, West Wood Products, Morris Co: Cost driver rates

Job Order costing, consulting Lee Consulting computes the cost of each consulting engagement by adding a portion of firmwide support costs to labor cost of the consultants on the engagement. The support costs are assigned to each consulting engagement using a cost driver rate based on consultant labor costs. Lee Consulting's

Legalize loan sharking

Please provide at least 300 words for this problem. If I can buy a car today for $5,000 and it is worth $10,000 in extra income next year because it enables me to get a job as a traveling anvil seller, should I take out a loan out from Larry the Loan Shark at a 90% interest rate if no one else will give me a loan? Will I be

Short-term interest rates and investments

A) The values of outstanding bonds change whenever the going rate of interest changes. Generally speaking, short-term interest rates are much more volatile than long-term interest rates. With that, short-term bond prices are more sensitive to interest rate changes than are long-term bond prices. Is this true or false? Expl

Effective interest rate.

What is the effective interest rate for each of the following payment plans, if someone borrows $4,000 at $500 interest for one year? 1. Annual payment 2. Semiannual payments 3. Quarterly payments 4. Monthly payments

Evaluate antique car offer; interest compounding

1. The owner of an antique car, priced at ?50.000, wants to sell it and receives the following offers: a) ?5.000 at the moment of the sale and the rest in 6 equal payments at the end of every two months of ? 8.169,75 each. b) 12 monthly payments of ? 4.897,20, starting the first one at the moment of the sale. Which

Problems involving interest, balance, value and funds

Please help with the following problem. What is the ending balance from an initial deposit of $4,250 at 12% compounded quarterly for 6 years? Find the present value of $5,000 in 5 years at 10% compounded annually. Find the value of an annuity in which $1,100 is deposited at the end of each year for 5 years, at an inter

EBIT and the relationship to the economy

Actually, this question has more to do with EBIT and the relationship to the economy. Let's say my company, Company A has no debt and a market value of $150,000. My EBIT is projected at $14,000. If the economy expands, EBIT will be 30% higher - as a contrast, if there's a recession, my EBIT will be 60% lower. I really want t

Secured vs. unsecured debt

Match the yield to maturity in column 2 with the security provisions (or lack thereof) in column 1. Higher returns tend to go with greater risk. (1) Security Provision (2) Yield to Maturity a. Debenture a. 6.85% b. Secured Debt b. 8.20% c.

Cost of debt and equity

Question - If my company has common stock with a BETA of 1.3, a rate of 4.5% and an expected return on the market of 12%, what is my cost of equity capital? Secondly, if my company has an outstanding debt issue with 12 years to maturity quoted at 105% of the face value and has a coupon rate of 8% annually, what is my pretax c

Interest rate payments

You have agreed to pay a creditor $5,000 one year hence, $4,000 two years hence, $¬3,000 three years hence, $2,000 four years hence, and a final payment of $1,000 five years from now. Because of budget considerations, you would like to make five equal annual payments to satisfy your contract. If the agreed-upon interest rat

Bond Interest Expense

41. On January 1, 2007, the Kings Corporation issued 10% bonds with a face value of $100,000. The bonds are sold for $96,000. The bonds pay interest semiannually on June 30 and December 31 and the maturity date is December 31, 2011. Kings records straight-line amortization of the bond discount. The bond interest expense for

Effective Annual Rate for First National Bank

57. Effective Rates. First National Bank pays 6.2 percent interest compounded semiannually. Second National Bank pays 6 percent interest, compounded monthly. Which bank offers the higher effective annual rate?

Math Project : Financial Planning for College Expenses

I have to do a math project and I have no idea how to do the calculation.Project should be at least three pages to include graphs and charts if needed. Your report should have a closing paragraph in which you summarize your advice and again emphasize the importance of financial planning for college expenses. Project: You h

three recent articles

Research and apply the content from a minimum of three recent articles about a topic of interest covered in this module. Produce a two-page (double-spaced) position paper discussing your viewpoint on the topic and refer to the content from the articles to support your position. Produce a paper discussing how the e-economy has ch

Book Values Using Effective Interest Rate

BC, Inc. plans to acquire an additional machine on January 1, 2004 to meet the growing demand for its product. Carlton Company offers to provide the machine to BC using the option listed below (each option gives BC exactly the same machine and gives Carlton Company approximately the same net present value cash equivalent at 10%)

Interest expense problem

On January 1 of the current year, Elston Corporation issued $1,500,000 of 10% debenture bonds on a basis to yield 9%, receiving $1,567,290. Interest is payable annually on December 31 and the bonds mature in 6 years. The effective interest method is used. (a) What is the interest expense for the first year? (b) What is the


Find the accumulated amount A if $3100.00 is invested at the interest rate of 7.855%/year compounded daily for 12 years. Find the effective rate corresponding to a 3.95%/year compounded daily. Find the present value of $75,000 due in 5 yr at 9.3%/year compounded monthly. David owns $30,000 of 15-yr public bonds. T