Your firm has debt worth 200,000, with a yield of 9%, and equity worth $300,000. It is growing at a 5% rate, and its tax rate is 40%. A similar firm with no debt has a cost equity of 12%. What is the value of the firm according to MM with corporate taxes? A) $475,875 B) $528,750 C) $587,500 D) $646,250 E) $710,875
"What are the six factors that determine the nominal interest rate on a security?" (Cornett, Adair, and Nofsinger, 2012, p. 200). Define each factor.
National Orthopedics Co. issued 9% bonds, dated January 1, with a face amount of $500,000 on January 1, 2011. The bonds mature in 2014 (4 years). For bonds of similar risk and maturity the market yield was 10%. Interest is paid semiannually on June 30 and December 31. Prepare an amortization schedule that determines interes
Assume that the following information is available as of today. U.S. Germany Real rate of interest required by investors 1% 1% Nominal interest rate
E14-3 (Entries for Bond Transactions) Presented below are two independent situations. 1. On January 1, 2012, Divac Company issued $300,000 of 9%, 10-year bonds at par. Interest is payable quarterly on April 1, July 1, October 1, and January 1. 2. On June 1, 2012, Verbitsky Company issued $200,000 of 12%, 10-year bonds dated Ja
For this problem, consider a 6% coupon bond that matures in 20 years. What would be the value of this bond if interest rates fall to 5% the day after it is purchased? If interest rates fell to 5% after one year, what would the bond be worth at that point?
a) You earn interest of 10% per year, how much will you have at the end of 20 years? N=20 I=10 Pv=0, fv=? Pmt = 100 b) How much must you invest each year if you want to have 50,000 at the end of 20 years? n-20 i= 10 fv=50,000 pmt= ? pv= 0.
1. An investment banker enters into a best efforts arrangement to try and sell 8 million shares of stock at $20 per share for Kemp Corporation. The investment banker incurs expenses of $1 million in floating the issue and the company incurs expenses of $750,000. The investment banker will receive 8 percent of the proceeds o
Because no job can ever be completely free from hazards, occupational safety requires a balancing of the interests of employees and employers. Using the ethical theories that are discussed in Chapter 3, defend a position regarding how these competing interests should be balanced from a moral perspective. Please use: Beau
1.Finding the implied interest rate (APR) when customers do not take the discount for credit terms of credit terms of 2/10 net 30.. 2.What is the effective rate for the above?
problem: compensating balances with idle cash balances. The treasurer for Macon Blue Sox baseball team is seeking a $20000 loan for one year from the 4th National Bank of Macon. The stated interest rate is 10%,and there is a 15% compensating balance requirement. The treasurer always keeps a minimum of $1500 in the baseball te
1) Hahn Company uses the percentage of sales method for recording bad debts expense. For the year, cash sales are $300,000 and credit sales are $1,200,000. Management estimates that 1% is the sales percentage to use. What adjusting entry will Hahn Company make to record the bad debts expense? A. Bad Debts Expense .........
A one year long forward contract on a non-dividend-paying stock is entered into when the stock price is $40 and the risk free rate of interest is 10% annually with continuous compounding. a.) what is the forward price? b.) six months later, the price of the stock is $45 and the risk-free interest rate is still 10%. What are
Please show formula and calculation: 1) You want to buy a house and wish to borrow $300,000. What would the monthly payment be if the loan requires equal monthly payments for 30 years at an interest rate of 5% of apr. What would your outstanding loan balance be immediately after you make your first payment? 2) You are pan
Set up the flexible budget at three levels for the income statement. Companies prepare budgets based on absorption and/or variable costing. Due to lack of information, we're limiting our budgeting to the absorption approach. You still need to estimate cost behavior based on trends for Sirius XM www.siriusxm.com Information
I'm confused and need help with answering this scenario: You are the chief executive officer of Money Games Inc.(MGI), which has begun to market Borrow & Spend, a video game set in the world of finance. To buy ads, MGI borrows $50,000 from First Savings Bank. On MGI's behalf, you sign a note for the loan and offer its account
Argue either for or against this statement and be sure to defend your reasoning. Reports are written for business executives who want them. Thus, you don't have to be concerned about holding your reader's interest.
You will prepare a flexible budget for next year for the company of your choice (A bakery is my choice). The budget needs to be realistic and based on corporate and economic trends. Set up the flexible budget at three levels for the income statement. Companies prepare budgets based on absorption and/or variable costing. Due
1. Suppose you make an investment of $10,000. This first year the investment returns 9%, the second year it returns 5%, and the third year in returns 4%. How much would this investment be worth, assuming no withdrawals are made? 2. How much would you need to deposit every month in an account paying 9% a year to accumulate by
1. You acquire the outstanding loan (note) of Shepard Company, who is having financial difficulty. Because of the financial difficulty, Shepard Company's credit rating has been downgraded and you acquire the note at a discount. To determine the purchase price of the note you discount it at the effective rate of interest rather
I need help with the following question: Mark and Kate are establishing a fund for their son's college education. What lump sum must they deposit in an account that gives 8% annual interest rate, compounded monthly, in order for them to have $60,000 in the fund at the end of 10 years?
1. Of the following, the most likely effect of an increase in income tax rates would be to? 2. A 10-year annual payment corporate coupon bond has an expected return of 11% and a required return of 10%. The bond's market price is 3, A bond that pays interest semiannually has a 6% promised yield and a price of $1045. An
A recent edition of The Wall Street Journal reported interest rates of 2.25 percent, 2.60 percent, 2.98 percent, and 3.25 percent for three-year, four-year, five-year, and six-year Treasury note yields, respectively, According to the unbiased expectation theory of the term structure of interest rates, what are the expected one-y
Use the compound interest formula for compounding more than once a year to determine the accumulated balance after the stated period. A $14,000 deposit at an APR of 4.6% with quarterly compounding for 7 years. The amount after 7 years will be (Round to the nearest cent as needed)?
Global Trends in Consumer Savings With the impacts of the recession of 2009 and the ensuing slow recovery, many Americans are looking to place more discretionary money into savings plans and investments than into vacations and luxury items. If an individual saves S4S00 and elects to place the total dollar amount into a savin
Decide whether the following statement makes sense (or is clearly true) or does not make sense (or is clearly false). Explain your reasoning. If interest rates stay 5% apr and I continue to make my monthly $75 deposits into my retirement plan, I should have at least $40,000 saved when I retire in 25 years. The statement_____
If someone is 21 years old, deposits $5000 each year into a traditional Individual Retirement Account (IRA) for 49 years at 6% interest compounded annually, and retires at age 70, how much money will be in the account upon retirement?
Use the appropriate compound interest formula to compare the balance in the account after the stated period of time. $15,000 is invested for 3 years with an Apr of 5% and daily compounding. The balance in the account after 3 years is __________
The present value of $100,000 to be received in five years at an interest rate of 16%, compounded annually, is $47,610. Required: Using a present value table (Table 6-4 and Table 6-5), your calculator, or a computer program present value function, calculate the present value of $100,000 for each of the following items (par
Can you explain some benefits and drawbacks of raising funds through debt for the FedEx Corporation?