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Interest Rates and the Cost of Debt

A flexible budget for next year at Amazon.com

Create a flexible budget for Amazon based on the 2012 actual result, being realistic based on history and economic trends. Use the absorption costing approach. Show three different growth rates. Explain your estimates and assumptions. Specifically, explain: What is the growth rate in sales for the past three years? Ar

Discussing Minority Interest

Minority interest: 1. Is an expense on the income statement and an asset on the balance sheet 2. Is an expense on the income statement and a liability (or sometimes equity) on the balance sheet 3. Is the amount an outside party owns in a parent company 4. Always requires that a company pay out dividends to the minority

Calculating Today's Investment Amount

John Hsu wants to start a business in 10 years. He hopes to have $100,000 at that time to invest in the business. To reach his goal, he plans to invest a certain amount today in a bank CD that will pay him 9.50 percent annually. How much will he have to invest today to achieve his target? (Round to the nearest dollar.)

VI Financial Management Assistance

1. Holding Period Return Based on the following information calculate the holding period return: P0 = $11.00 P1 = $11.40 D1 = $1.02 2. Risk and Return, Coefficient of Variation Based on the following information, calculate the coefficient of variation and select the best investment based on the risk/reward relations

Required Interest Rates, Bonds and Yield to Maturity

1. Assume Venture Healthcare sold bonds that have a 10-year maturity, a 12 percent coupon rate with annual payments, and a $1,000 par value. a. Suppose that two years after the bonds were issued, the required interest rate fell to 7 percent. What would be the bonds' value? b. Suppose that two years after the bonds were issue

U.S. GDP results and trends for the most recent three-year period

Identify the U.S. GDP results and trends for the most recent three-year period, indicating the key factors impacting the increase or decrease in GDP. Provide support for your rationale. •Recommend a strategy for improving the U.S. GDP over the next five years. Provide support for your recommendation. •The Federal Reserv

Compound Interest And Investment Growth

Suppose that $ 750 is invested at 7%interested, compounded semiannually. Given that A=(1+r/n)^nt a. The function for the amount to which the investment grows after t years. b. Find the amount of money in the at t=1,6,10,15 and 25 years

Non-Interest-Bearing Promissory Note

If an employee receives a non-interest-bearing promissory note from his employer as compensation, how much income does that employee have to include in his income?

U.S. Federal Reserve

Should the U.S. Federal Reserve decrease interest rates at its next meeting? Why or why not?

Optimal Fraction of Debt

Define the optimal fraction of debt and the growth rate of a firm. What is the relationship between the two?

Debt Liability

Sweetie Hughes decided to fulfill her lifelong dream of opening her own cupcake store, Sweetie's Cupcakes. Regions Bank approved a $50,000 unsecured line of credit for Sweetie's Cupcakes based on documents signed by Hughes as the sole proprietor. Regions Bank provided funds to Sweetie's Cupcakes for two years. After the twenty-f

Enterprise/Systemic Risk

Another of your clients is the son of the CEO of a local bank. He just took over for his dad who recently had a heart attack. He came from role as CEO of a large manufacturing company and is new to the banking industry. He has received instructions from his Board of Directors, to make sure he has established adequate reserves ag

Value of Investment When Interest is Compounded

1. If a nurse deposits $1,000 today in a bank account and the interest is compounded annually at 12%, what will be the value of this investment: a) five years from now? b) ten years from now? c) fifteen years from now? d) twenty years from now?

Approximate Nominal Rate of Interest

Coverall Carpets Inc. is planning to borrow $12,000 from the bank. The bank offers the choice of a 12 percent discount interest loan or a 10.19 percent add-on, one-year installment loan, payable in 4 equal quarterly payments. What is the approximate (nominal) rate of interest on the 10.19 percent add-on loan? a. 5.10% b. 10.

Theories of Interest Rate Determination

You are a financial analyst for the CMC Corporation. This corporation predicts changes in the economy, such as interest rates, retail trends, and unemployment. Your job is to educate incoming analyst on the terminology, definitions, and uses of interest rate theories, yield curves, and predictions. In your next training session,

How Banks Make Profits

Everyone has an opinion why banks are not lending money these days. One author in the article The Real Reason Banks Won't Lend Any Money talks about it from personal experience. He gives several reasons but one in particular is that, they won't start lending until interest rates move up. Discuss why you think this is a factor an

Calculate the expected interest rates in the given case.

1. Yearly rates are 4%, 5%, 6%, 7%, and 8% for the next five years. Please compute and explain the expected interest rate for both the three and four-year bonds if we show the liquidity premiums to be 1.25%, 1%, .75%, .5%, and 0%. 2. Yearly rates are 4%, 5%, 6%, 7%, and 8% for the next five years. Please compute and explain t

Problem 7.2: Notes Payable - Discount Basis, Colombo Co.

On August 1, 2010, Colombo Co's treasurer signed a note promising to pay $240,000 on December 31, 2010. The proceeds of the note were $232,000. Required: a) Calculate the discount rate used by the lender. b) Calculate the effective interest rate (APR) on the loan. c) Write the journal entry to show the effects of 1. Signin

Calculating Bad Debt Expense Using the Example of Wellington Corp.

Wellington Corp. has outstanding accounts receivable totaling $6.5 million as of Dec. 31 and sales on credit during the year of $24 million. There is also a credit balance of $12,000 in the allowance for doubtful accounts. If the company estimates that 8% of its outstanding receivables will be uncollectible, what will be the amo

Investment: Bonds and Year-End Interest

You wish to retire a $10,000,000 bond that can be called in 5 years for 110 percent of par value, or $11,000,000. You also need to make year-end interest payments of $700,000 per year in each of the next five years. If you can invest money at 8 percent, how much money must you set aside today to meet these obligations?

Calculate the interest portion of the first 31 payments.

Consider a standard mortgage (360 months) with monthly payments and a nominal rate (monthly compounding) of 5.70%. What portion of the payments during the first 31 months goes toward interest? 79.39% 80.48% 82.86% 84.08% 85.83%

Value of a Bond Based on Interest Rates

Suppose you buy an 8% coupon, 20 year bond today when it is first issued. If interest rates suddenly rise to 12%, what happens to the value of your bond? (coupon payments are semi-annually).

Calculating Implied Annual Interest Rate

Suppose the December CBOT Treasury bond futures contract has a quoted price of 80-07. The T-bond is a 20-year 6% coupon bond and the interest is paid semi-annually. What is the implied annual interest rate inherent in the futures contract? a) 6.86 b) 7.22 c) 7.60 d) 8.00 e) 8.40

Interest on Bonds Article Critique

Discuss how the article applies or relates to the financial management of a company and answer the following questions in 600 words. Use one outside source as reference. 1. What is the author's focus? 2. What points is the author making?/ 3. How does the authors points apply to financial management? 3. What is the author's

Discount Rate and Present Value

The following information lists the questions and gives background on the company in question. I would appreciate very much if you could help me to get on the right track on what I have to do to get the right answer. Questions: 1. How much would you pay for a $ 100,000 Raytheon bond today given risk, interest rate, inflation

Systemic v Unsystemic Events

Classify the following events as mostly systematic or mostly unsystematic and tell us why. Is the distinction clear in each case? a) Short term interest rates increase unexpectedly b) The interest rate a company pays on its short term debt borrowing is increased by its bank. c) Oil prices unexpectedly decline d) An oil tan