Goodrich Rabobank Interest Rate Swap Essay example

* If the contract were to require new fixed costs in addition to variable costs at 10 % the total Margin cost would be $ 79,524 which would be a substantial increase of $8,056 from question 1

academic year interest rate of 3.76 percent would pay a 5,032 dollars interest over 10 years,

For option 2 I calculated the savings I receive from reduced payment. For that I used difference between the mortgage payments as annuity payment for 180 months for Question A and for 60 months for Question B

The bank rate is the interest rate at which the Bank of Canada stands ready to lend reserves to chartered banks. The banker 's deposit rate is the interest rate that the Bank of Canada pays banks on their deposits at the Bank of Canada. Changes to these rates by the Bank of Canada typically spread to other interest rates and therefore will influence the amount of lending done by the banks.

16. If the nominal interest rate on an account is 1% and the inflation rate is 2%, the real interest rate is:

In addition, he needs to borrow $173.5 at the risk-free borrowing rate of RF,b . The

Therefore the annual interest rate is 8% and the effective annual rate compounded quarterly is 8.24%

Company issues 15,000 shares of stock @ $200 per share to raise $3,000,000 in capital with 5% return (cost of equity)

This represents a 7% increase in stock price. Further, the additional leverage and return of excess cash to shareholders will significantly increase ROE. If the market determines that an 80% debt capital structure is feasible for BBBY, then we will expect further capital gains as investors applaud shareholder friendly policies and re-examine EPS estimates. However, if top line growth and same store sales growth continue to trend downward, investors may become skeptical of BBBY management’s ability to continue generating over 30% EPS growth, and thus question the ability of the company to service its debt in the future.

An analysis of a repurchase of stock for $400 million cash, and recapitalization to 80% debt-to-total capital by borrowing $1.27 million reveals that BBBYs return on equity will be 113%, return on assets 61% and an after tax cost of debt of 28%. ROE is > ROA and ROA > after tax cost of debt. With the 80% debt-to-total capital structure ROE exceeds the other two capital structure scenarios of no debt and 40% debt-to-total capital. While all of this looks great there are other considerations. The household and personal products industries debt to total asset ratio is 34.69% while BBBY debt to total asset ratio is at 44% ($1,270,000/$2,865,023). Increasing to this capital structure would also reduce shareholders earnings per share.

After the calculations you end up coming out with a rate of 14.87%. The third and final part of question three asks what rate you will need if the interest is compounded semiannually. All you have to do is double the amount of terms and you will come out with a lower number of 7.177%. Since the interest is compounded semiannually that means that you will need to times that number by two and you come out with your final number of 14.35%.

So, the 20 year corporate bond interest rate associated with the company’s rating is 3.86.

c. Is your estimate of Lex’s cost of equity appropriate as a discount rate for Lex’s total operating cash flows? Why or why not?

3. How small must the combination of F and X be to make this an

from the Suburban National Bank to $399,000 in the spring of 1996. The maximum loan that