QUESTION On January 1, 2008, Debtor Corporation issued 10,000 five-year bonds with a face value of $1,000 and an annual coupon of 4 percent. Bonds of similar risk were yielding 8 percent p.a. in the market at the time.a. What did the firm receive for each bond issued?b. At the end of 2008, the market […]
Date: September 2nd, 2020
QUESTION Describe the different forms of financial guaranteesseen in the bond markets. Municipal Bond Municipal bond insurance was introduced in the U.S. in 1971 by American Municipal Bond Assurance Corp. (subsequently renamed AMBAC and later Ambac), the first of the financial guaranty corporations, being a separately capitalized insurance company formed for the purpose of insuring […]
Date: September 2nd, 2020
QUESTION Discuss the efficient markets hypothesis and its significance for the theory of finance. Explain why market efficiency leads a manager to focus on NPV and free cash flow. The Efficient Market Hypothesis states that at any given time, security prices fully reflect all available information. The implications of the efficient market hypothesis are truly […]
Date: September 2nd, 2020
QUESTION What is meant by capital planning? Why is IRR important to an organization? Why is NPV important to a project? How would you select from multiple projects presented to your organization? Capital Planning: Capital planning is the creation of plans for the acquisition of Long-Term assets. When a company purchases an assets , for […]
Date: September 2nd, 2020
QUESTION GTG is expected to pay a dividend of 2.50 per share next year. Calculate the value of a share if dividends are expected to grow at 3.0%, the riskless rate is 5.5%, the expected market risk premium is 5.5%, and the companys beta is 1.60.The answer is 22.12, show how to solve. To calculate […]
Date: September 2nd, 2020
QUESTION Which of the following statements is CORRECT?a. If you have a series of cash flows, each of which is positive, you can solve for I, where the solution value of I causes the PV of the cash flows to equal the cash flow at Time 0.b. If you have a series of cash flows, […]
Date: September 2nd, 2020
QUESTION 24-2 Give two reasons stockholders might be indifferent between owning the stock of a firm with volatile cash flows and that of a firm with stable cash flows.List six reasons risk management might increase the value of a firm.Why do options typically sell at prices higher than their exercise values?¦ 24-2 3. Stockholders can […]
Date: September 2nd, 2020
QUESTION Your office mate performed an 8% per year Present Worth evaluation of two alternatives before he left on vacation. Now, your supervisor wants you to provide the results in Annual Worth terms. The PW results are: PW(a) = $-517,510 for a life of 4 yearsPW(b) = $-812,100 for a life of 8 years Concept: […]
Date: September 2nd, 2020
QUESTION 1. Given the following annual net cash flows, determine the internal rate of return to the nearest whole percent of a project with an initial outlay of $750,000.YEAR NET CASH FLOW1 $500,0002 $150,0003 $250,0009%11%13%15%2. J.B. Enterprises purchased a new molding machine for $85,000. The company pai¦ 1) Given the following annual net cash flows, […]
Date: September 2nd, 2020
QUESTION The following items and amounts were taken from Linus Inc.s 2012 income statement and balance sheet.Instructions(a) In each, case, identify on the blank line whether the item is an asset (A), liability (L), stockholders equity (SE), revenue (R), or expense (E) item.(b) Prepare an income statement for Linus Inc. for the year ended December […]
Date: September 2nd, 2020
