(Bond valuation) You own a 10-year, $1,000 par value bond paying 7 percent interest annually. The market price of the bond is $875, and your required rate of return is 10 percent. a. What is the expected rate of return of the 10-year, $1,000 par value bond paying 7 percent interest annually if its market price is $875? b. What is the value of the bond to you, given your 10 percent required. rate of return?

(Bond valuation) You own a 10-year, $1,000 par value bond paying 7 percent interest annually. The market price of the bond is $875, and your required rate of return is 10 percent. a. What is the expected rate of return of the 10-year, $1,000 par value bond paying 7 percent interest annually if its market price is $875? b. What is the value of the bond to you, given your 10 percent required. rate of return?

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

Section: Chapter Questions

Problem 33P: Assume the demand for a companys drug Wozac during the current year is 50,000, and assume demand...

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Assume the demand for a companys drug Wozac during the current year is 50,000, and assume demand will grow at 5% a year. If the company builds a plant that can produce x units of Wozac per year, it will cost 16x. Each unit of Wozac is sold for 3. Each unit of Wozac produced incurs a variable production cost of 0.20. It costs 0.40 per year to operate a unit of capacity. Determine how large a Wozac plant the company should build to maximize its expected profit over the next 10 years.
Beckham Broadcasting Company (BBC) has operating income (EBIT) of $2,500,000.The company’s depreciation expense is $500,000 and it has no amortization expense. The company is 100 percent equity financed (that is, its interest expense is zero). The company has a 40 percent tax rate, and its net investment in operating capital is $1,000,000.a. What is BBC’s net income?b. What is BBC’s net operating profit after taxes (NOPAT)?c. What is BBC’s free cash flow?
Capital Budgeting with Taxes (Non-MACRS Depreciation); Sensitivity Analysis GravinaCompany is planning to spend $6,000 for a machine that it will depreciate on a straight-line basisover 10 years with no salvage value. The machine will generate additional cash revenues of $1,200 ayear. Gravina will incur no additional costs except for depreciation. Its income tax rate is 35%. Thepresent value annuity factor for 15%, 10 years (from Appendix C, Table 2) is 5.019.Required1. What is the payback period of the proposed investment (in years, and rounded to 1 decimal place) underthe assumption that the cash inflows occur evenly throughout the year?2. What is the accounting (book) rate of return (ARR) based on the initial investment outlay? Round youranswer to 1 decimal place (e.g., 13.571% = 13.6%).
What is the After-tax Cost of Debt for Foggy Futures Weather Forecasters? The firm is in the 40% tax bracket. The firm can issue $1000 par value, 9% coupon interest bond with a 15 year maturity date. The selling price is $1,000. There will be a Discount of $20 and Flotation cost of $25. (NB: Use the intrinsic (internal) values (rates, cost) of each component in the capital structure.)
Costco can purchase a bag of Starbucks coffee for $20.00 less discounts of 20%, 15%, and 7%. It then adds a 40% markup on cost. Expenses are known to be 25% of the regular unit selling price. a. What is the cost of the coffee? What is the regular unit selling price? How much profit will Costco make on a bag of Starbucks coffee? What markup on selling price percentage does this represent? Repeat questions (a) through (d) if the list price changes to $24.00.
As part of the employment interview for an accounting job at Sound Design, you have been asked to answer the questions below, based on an invoice from one of Sound Design's vendors, Target Electronic Wholesalers. Invoice Stock # Description Unit Price Amount 4811V Stereo Receivers 50 ✕ $293.50 = _______________________ 511CX Blu-Ray Players 25 ✕ $136.28 = _______________________ 6146M Home Theater Systems 40 ✕ $656.12 = _______________________ 1031A LCD TVs 20 ✕ $594.00 = _______________________ Merchandise Total _______________________ Insurance + Shipping $1,250.00 Invoice Total _______________________ An invoice. The top of the invoice is divided into several distinct sections. The first section is located in the top left of the invoice, is unlabeled, and contains an image of a target with an arrow in the center of the target. The second section is located in the top center of the invoice, is unlabeled,…
True or false 1. Interest Rate Parity allows a company to lock in profits by borrowing in the low interest rate currency and investing in the high interest rate currency? 2. When calculating Days Sales Oustanding, it is important to include all credit and cash sales in the equation.
Annie bought one dozen smartphones for P200,000.00 with a discount of 5%. She sold halfdozen at a price of P18,000.00 per unit. However, a new model of smartphone became availablein the market, so she sold the remaining half dozen @ P12,000.00 each unit. What was her profitor loss?
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What is the relative tax advantage of corporate debt if the corporate tax rate is Tc=0.21 , the personal tax rate on interest is TpD=0.37 , but all equity income is received as capital gains and escapes tax entirely ( TpE=0 )? How does the relative tax advantage change if the company decides to pay out all equity income as cash dividends that are taxed at 20%? Note: Do not round intermediate calculations. Round your answers to 4 decimal places.
The water pump company has succeeded in introducing a water pump that saves electricity, is easy to install, and is durable (guaranteed). Its high quality has given the company an early edge in the local and national markets, but the entry of highly skilled competitors may occur within the next 3 years. Assume that the income and expense relationship of the company is as follows: TR = 22000Q - 15.6Q2 MR = dTR / dQ = 22000 - 31.2Q TC = 300000 + 4640Q + 10Q2 MC = dTC / dQ = 4640 + 20Q Where TR is income (in thousands of rupiah), Q is quantity (in units), MR is marginal income (in thousands of rupiah), TC is total cost, including a risk-adjusted normal rate of return on investment (in thousands of rupiah), and MC is the marginal cost (in thousands of rupiah). a. Compute: the profit-maximizing price-output combination. b. Compute: long-run equilibrium high-price / low-output. c. Compute: long-run low-price / high-output equilibrium
Kevin’s friend, Sam, runs a septic tank repair business. Your research shows that the following price and demand for servicing a tank: Current Price: $300New Price: $375 Current demand: 450 tanksNew demand 425 tanks What is the coefficient of elasticity for Sam’s business? Here is the formula for calculating elasticity: Ed = {(Q1-Q2) / [1/2 (Q1+Q2)] } / {(P1-P2) / [1/2 (P1 + P2)]}