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Interest Rates and the Cost of Debt

Finance problems

1. An investor recently purchased a corporate bond that yields 9%. The investor is in the 36% combined federal and state tax bracket. What is the bond's after-tax yield? 2. Corporate bonds issued by Johnson Corporation currently yield 8%. Municipal bonds of equal risk currently yield 6%. At what tax rate would an investor b

Feasibility Analysis: Darlana Furniture

See the attachment. Step 1: Populate the answers in the Financial ratios Word .doc chart for years 2006, 2007, and 2008 based on the financial statements in the Darlarna Furniture Ltd. case by Dan Thompson. Step 2: Assist with notes on the following sections: 1. Liquidity 2. Asset management 3. Long-term debt-payi

Valuation of Financial Assets: Compound value in 1, 5, 15 years

Please see the attached file for proper format of the table. 1. (Compound value) Stanford Simmons, who recently sold his Porsche, placed $10,000 in a savings account paying annual compound interest of 6 percent. a. Calculate the amount compound of money that will have accrued if he leaves the money in the bank for 1, 5, a

Car Buying Project

To set the scenario for the project, imagine that after several years of hard work you have graduated from Bryant & Stratton College and you have just gotten your dream job. Now that you are earning a nice salary, you decide you want to buy a new car. You decide you can afford to make a down payment and then a monthly payment

1) Why would you apply for a position within Kerry Group? What motivations do you have to work for the organization? Please outline the research you have undertaken on the organization and specifically why it is of interest to you. 2) Why would you be interested in working in operations? 3) What is your understanding of Kerry's position within the Food industry? Who are their main competitors and what are the key strengths of Kerry?

Can you help me with the following assignment? 1) Why would you apply for a position within Kerry Group? What motivations do you have to work for the organization? Please outline the research you have undertaken on the organization and specifically why it is of interest to you. 2) Why would you be interested in working

Callable Bonds, Market Price, and Applicable interest rate

Suppose a bond with a par value of $1000 pays an annual coupon payment of $100. Interest rates are currently at 7% for all maturities of the same default risk as this bond. The bond has 10 years until maturity but is callable beginning in 2 years at a $75 call premium (that is, for $1075.00). a. If interest rates remain th

Swaps, arbitrage, interest rate swaps & hedging

1. Company A, a low-rated firm, desires a fixed-rate, long-term loan. Company A currently has access to floating-rate funds at a margin of 1.5% over LIBOR. Its direct borrowing cost is 13% in the fixed-rate bond market. In contrast, Company B, which prefers a floating-rate loan, has access to fixed-rate funds in the Eurodollar b

Effective interest amortization for a bond premium

Please see the attachment for full problem description. Effective interest amortization for a bond premium On January 1, 2012, Crume Incorporated issued bonds with a face value of $100,000 a stated rate of interest of 9 percent, and a five year term to maturity. Interest is payable in cash on December 31 of each year

Decision Tree Issue and Justification Rationale

"A fund manager at Pacific Investment Management Corporation (PIMCO) manages a large investment fund for a number of client organizations within Los Angeles and other Southern California counties. The fund currently has $5,000,000 in uninvested cash and the manager is interested in selecting an optimal investment instrument for

Federal or state bank with options for compounding

You are offered two loan options which you must choose between. Federal Bank offers to charge you 6% compounded annually. State Bank offers to charge you 5.8% compounded monthly. Which of the following is true? You should choose State Bank with an effective annual rate of 5.96%. You should choose Federal Bank because it ha

Interest Payments for Jobbs Company

1. Jobbs Company issues 10%, five-year bonds, on December 31, 2010, with a par value of $100,000 and semiannual interest payments. Use the following straight-line bond, amortization table and prepare journal entries to record (a) the issuance of bonds on December 31, 2010; (b) the first interest payment on June 30, 2011; and (c)

Interest rate risk and swaps for commercial banks

A commercial bank has $200 million of floating-rate loans yielding the T-bill rate plus 2 percent. These loans are financed with $200 million of fixed-rate deposits costing 9 percent. A savings bank has $200 million of mortgages with a fixed rate of 13 percent. They are financed with $200 million in CDs with a variable rate of T

Interest Rate and Market Value

The effect of an interest rate change on the market value of a Financial Institution's equity is a function of three things. What are they and how do the affect the equity value change?

Capital Structure: Firm's Net Income and Free Cash Flow

1 Bartling Energy Systems recently reported $9,250 of sales, $5,750 of operating costs other than depreciation, and $700 of depreciation. The company had no amortization charges, it had $3,200 of outstanding bonds that carry a 5% interest rate, and its federal-plus-state income tax rate was 35%. In order to sustain its opera

Calculate the lowest effective interest rate

Please help with the following problem. Last National Bank is offering you a loan at 10%; payments on the loan are to be made monthly. Credit Union is offering you a loan where payments are to be made semi-annually; the rate on the loan is also 10%. Local Bank down the street is also offering a loan at 10% where the payments

What is the yield on a six-year bond issued by Morgan Motors?

See attached files. 1) Morgan Motors has three-year bonds that currently yield 8.25%. The real risk-free rate (r*) is 2.50% and is expected to remain constant. Inflation is expected to be 3.0% per year for each of the next four years and 4.50% thereafter. The maturity risk premium (MRP) is determined from the formula: O.1(t

What is the yield on a seven-year, AA-rated bond issued by Pettigrew?

The real risk-free rate (r*) is 2.8% and is expected to remain constant. Inflation is expected to be 5% per year for each of the next three years and 4% thereafter. The maturity risk premium (MRP) is determined from the formula: 0.l(t - 1)%, where t is the security's maturity. The liquidity premium on all Pettigrew Power Co.'s b

Discuss taxability of insurance proceeds

Joe owes Willy $5,000 from an old gambling debt. Joe knows that there is no way he can repay the debt in the near future. He asks Joe if he will take a $25,000 life insurance policy that has a cash surrender value of $4,200 and release him from the debt. Willy agrees to take the insurance policy and cancels Joe's debt. Willy

Consolidation work and financial statements

Consolidation work and financial statements subsequent to acquisition Background and Information Palus Corporation acquired 90 percent of Stalus Company's voting stock on January 1, 2010. The price paid was $145,000. The excess of costs over book value was $10,000, which should be attributed to goodwill and must be amortiz