fin 516 homework week 2 Essay

The lifetime value of a typical customer in each segment when the discount rate is 15%.

* Interest rate had a 125bp spread over the current yield on 10-year US Treasury bonds (=4.25%).

To equal $6,697.44, the stock price must increase to at least $37.23[2] at the end of the 5th year. The stock price has to be higher than $35 in order to be exercised and make a gain, otherwise she will leave it expire worthlessly. However, from Exhibit 2, Telstar stock price has

b.What are the amounts and timing of the acquisition investment’s free cash flow from 2013 through 2022?

b. As stated in the case, you should assume that operating costs will grow annually at 1% in real terms. You should however be consistently using nominal cash flows while making the cash flow projections.

In accordance ASC 470-50-40-21b Modifications to or exchanges of line-of-credit or revolving-debt arrangements resulting in either a new line-of-credit or revolving-debt arrangement or resulting in a traditional term-debt arrangement shall be evaluated in the following manner:“ If the borrowing capacity of the new arrangement is greater than or equal to the borrowing capacity of the old arrangement, then any unamortized deferred costs, any fees paid to the creditor, and any third-party costs incurred shall be associated with the new arrangement (that is, deferred and amortized over the term of the new arrangement.”

2. If you had a payment that was due you in 5 years for $50,000 and you could earn a 5% rate of return, how much

11. Returning the risk free rate to 4%, what happens to the value of the option if the Whirlpool’s cost of capital goes from 9% to 15%?

11. Returning the risk free rate to 4%, what happens to the value of the option if the Whirlpool’s cost of capital goes from 9% to 15%?

At an interest rate of 15% per year (3.75% for three months, the amount to borrow equals

Natalie’s grandmother has decided to charge interest of 6% on the note payable extended on November 16. The loan plus interest is to be repaid in 24 months. (Assume that half a month of interest accrued during November.)

Steps in bond refunding decision: (1) Calculate the initial investment required to call the old bond issue and float the new one; (2) Find the annual cash flow savings from the new versus old bond issue; and, (3) Find the net present value of refunding decision. Answers to parts (a)-(f) of this problem will be determined with this procedure.

15. If you have a short position in one futures contract, the changes in the margin account from daily marking-to-market will result in the balance of the margin account after the third day to be: A) B) C) D) $1,425 $2,000 $2,325 $3,425

1. We can use the Black-Scholes formula (equation 7.36 pricing European calls. C = SN(d1 ) − Xe− rf T N(d 2 ) where d1 = ln(S/ X) + rf T + (1/ 2 )σ T σ T

In a firm commitment where it buys the shares at 10 dollars, its profit depends the price it is able to be sold. If the price is higher than $10 it makes profit, but the price lower the $ 10, the bank lose money. In the best effort deal, its profit depends on how many shares be sold. The bank obtain a fee of $0.2*10 million=$2 million.