Debt Financing
19. The fact that a percentage of the interest income received by one corporation is excluded from taxable income has encouraged firms to use more debt financing relative to equity financing. True/False?
19. The fact that a percentage of the interest income received by one corporation is excluded from taxable income has encouraged firms to use more debt financing relative to equity financing. True/False?
16. An investor with a six year investment horizon believes that interest rates are determined only by expectations about future interest rates. This investor should expect to earn the same rate of return over the 6 year time horizon if the investor buy a 6 year or a 3 year bond now and another 3 year bond three years from now.
Question #1 Sauer Food Company has decided to buy a new computer system with an expected life of three years. The cost is $150,000. The company can borrow $150,000 for three years at 10 percent annual interest or for one year at 8 percent annual interest. How much would Sauer Food Company save in interest over the three-
What formula do I use to calculate the following question? A firm has notes payable of $ 1,546,000, long term debt of 13,000,000 and total interest expense of $1,300,000. If the firm pays 8 percent interest on its long-term debt, what interest rate does it pay on its notes payable?
I have attached a spread sheet to determine the additional funds needed for the next six years. The actual assignment is for week 2. Please check my calculations for any errors. Additionally, I have attached the amortization schedules. In addition to this , I need some ideas about creating a second speadsheet. I believe I would
Procter Micro-Computers, Inc., requires $1,200,000 in financing over the next two years. The firm can borrow the funds for two years at 9.5 percent interest per year. Mr. Procter decides to do economic forecasting and determines that if he utilizes short-term financing instead, he will pay 6.55 percent interest in the first year
Your bank will lend you $4,000 for 45 days at a cost of $50 interest. What is your effective rate of interest? If you borrow $12,000 at $900 interest for one year, what is your effective interest rate for the following payment plans? a. Annual payment. b. Semiannual payments. c. Quarterly payments. d. Monthly payments
A firm sells its accounts receivables to a factor at a 1.5 percent discount. The average collection period is 1 month. What is the implicit effective annual interest rate on the factoring arrangement? Suppose the average collection period is 1.5 months. How does this affect the implicit effective annual interest rate?
1. An analyst is trying to estimate the intrinsic value of the stock of Harkleroad Technologies. The analyst estimates that Harkleroad's free cash flow during the next year will be $25 million. The analyst also estimates that the company's free cash flow will increase at a constant rate of 7% a year and that the company's WACC
Your company needs $500,000 in two years time for renovations and can earn 9% interest on investments. a) What is the present value of the renovations? b) If your company deposits money continuously at a constant rate throughout the two-year period, at what rate should your money be deposited so that you have $500,000 wh
Please use attached format to answer questions. 1. Shock Electronics sells portable heaters for $25 per unit, and the variable cost to produce them is $17. Mr. Amps estimates that the fixed costs are $96,000. a. Compute the break-even point in units. b. Fill in the table below (in dollars) to illustrate that the break-e
Using the following data, calculate the fixed-rate payer's first two net quarterly payments/receipts for a hypothetical interest rate swap described below. Notional principal $10 million Fixed rate 7.00% Days in first quarter 91 Days in second quarter 92 Current LIBOR (LIBOR0) 5.00% Expected LIBOR (LIBOR1)
Question: A company has a variable-rate loan with a bank paying LIBOR plus 65. The company wishes to create a synthetic fixed-rate loan and enters into an interest rate swap paying a swap fixed rate of 9 percent and receives LIBOR. The company also pays an annual swap spread of 35 basis points to the swap dealer. Calculate the e
On July 1, 2002, Imperial Oil Company issues $2,000,000 face value, 12%, 10-year bonds at $2,249,245. This price resulted in a 10% effective-interest rate on the bonds. Full problem is on the attached excel file
On 10/1/05, Astros Co lends $350,000 to the company batting practice pitcher at an annual interst rate of 7.2%. This act of graciousness will allow the batting practice pitcher to purchase a new spring training condominium. Terms of the loan require the batting practice pitcher to repay Astros Co with two hundred (200) equal m
You were so thorough, I have another question: A company plans to issue $20,000,000 of 20-year bonds next June. The company's current cost of debt is 10%. But the firm's financial manager is concerned that interest rates will increase in coming months, and has decided to take a short position in U. S. government t-bond futur
A steel fabrication company invested $800,000 in a new shearing unit. At an interest rate of 12% per year, compounded monthly, the monthly income required to recover The investment in 3 years is closest to? A. $221,930 B. $31,240 C. $29,160 D. $26,570
AN INTEREST RATE OF 2% PER MONTH IS THE SAME AS: A. 24% PER YEAR B. A NOMINAL 24% PER YEAR, COMPOUNDED MONTHLY ???? C. AN EFFECTIVE 24% PER YEAR, COMPOUNDED MONTHLY ??? D. BOTH ''A'' and ''B''
Solve this problem: With a loan amount of $174,154 and an APR of 8.275% and a term of 28 yrs (paid monthly): 1) Calculate the amount of interest paid. 2) Calculate the amount of interest saved by making extra payments in increments of $50 (from $50 - $1000) 3) MAIN QUESTION: calculate the amount where the maximum i
The formula for the amount due on a loan is A= P (1+(r/m))^(mt) Now in the question the time in years (t) is 6 years 9 months. P= $17500 r=0.085 How do I write the time(t) in the equation? Also, what if the time was 4 years 3 months, how would I write that for the time in years (t)? Also, what does semiannually, mon
The question is: Find the amount due on each compound interest loan. $7500 at 6.5% for 8 years 6 months if the interest is compounded: a. Annually b. Quarterly c. Weekly I know the formula is A=P(1+(r/m))^(mt) but my question is, how do i write the ''8 years 6 months'' as my time (t)?
(See attached file for full problem description) --- Calculating Interest Rates (Example) How do you determine the annual interest rate? Present Values Future Values Time Period _____________________________________________________ 100 115.76 3
Can you please take me through this example process step by step? Future Values In 1880 five aboriginal trackers were each promised the equivalent of 100 Australian dollars for helping to capture the notorious outlaw Ned Kelley. In 1993 the granddaughters of two of the trackers claimed that this reward had not been paid.
Quinn Electric Company has outstanding a bond issue that will mature to its $1,000 par value in 12 years. The bond has a coupon rate of 15% and pays the interest annually. a) Find the value of the bond if the required return is (1) 10 percent, (2) 15 percent and (3) 17 percent. b) Use your findings in part a) to discuss the
Cain Auto Supplies and Able Auto Parts are competitors in the aftermarket for auto supplies. The separate capital structures for Cain and Able are presented in the attached file. a) Compute earnings per share if earnings before interest and taxes are $10,000, $15,000, and $50,000 (assume a 30 percent tax rate). b) Explain the
My instructor posted a message in our classroom that said to show our work on our final and she would give us partial credit if we missed the answer to a problem but used the correct method. The attached spreadsheet shows the answers that I turned in and listed below are the correct answers that she gave. I didn't receive partia
If you invest $100 at the end of each month in a fixed interest mutual fund paying annual interest of 6% compounded monthly what will your investment be worth after 10 years?
Paying interest on a loan is considered a(n): A. Investing activity B. Operating activity C. Equity activity D. Financing activity
The spot exchange rate between the U.S. dollar and the German mark is $.5500/DM. The dollar deposit rate is 8 percent and the DM deposit rate is 4 percent. a. What is covered interest parity? What is the six-month forward rate if covered interest parity holds? b. What is the unbiased forward rate hypothesis? If the unbias
The Treasurer for Pittsburgh Iron Works wishes to use financial futures to hedge her interest rate exposure. She will sell five treasury futures contracts at $107,000 per contract. It is July and the contracts must be closed out in December of this year. Long-term interest rates are currently 7.3 percent. If they increase to