Consider C-grade bonds with average cumulative default rate 19.1 for year 5 and 22.53 for year 6. For these bonds, what is the 1-year hazard rate for the 6th year?
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Consider C-grade bonds with average cumulative default rate 19.1 for year 5 and 22.53 for year 6.
For these bonds, what is the 1-year hazard rate for the 6th year?
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- The Penn Central Railroad has not paid local taxes since 1969, under federal bankruptcy court protection. Some years later the court required Penn Central to offer municipalities a choice of two payment options to clear this liability. (PennCentral had been absorbed by Conrail, so there were no future tax liabilities involved.) The choices were (a) immediate payment of 44 percent of the total liability or (b) immediate payment of 20 percent of the liability, 10 percent paid at the end of each of the next three years, and 50 percent paid at the end of ten years. Which alternative would you recommend to a municipality and why?Nielson Motors (NM) has no debt. Its assets will be worth $600 million in one year if the economy is strong, but only $300 million if the economy is weak. Both events are equally likely. The market value today of Nielsonʹs assets is $400 million. The expected return for Nielson Motors stock without leverage is closest to: A. ‐25.0% B. ‐17.5% C. ‐12.5% D. 12.5%A share of stock in Enbridge Inc. pays an annual dividend of $3.34, and the dividend is expected to grow at 2%, on average, in the foreseeable future. The current market price is $44.58/share. Below are the three individuals based on risk perception by each individual (from low to high). Identify who will likely be a buyer or a seller of this stock. (Each individual currently owns 100 shares.) Individual X has a discount rate of 5% Individual Y has a discount rate of 8% Individual Z has a discount rate of 11%
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- Global Giant is a multinational corporation that transfers intermediate products between divisions. It has a manufacturing division (the seller) in a low-tax rate country and a marketing division (the buyer) in a high-tax rate country. If Global Giant wants to minimize its worldwide tax liability to the extent possible within the laws, we would expect Global Giant to: Question 7 options: a) establish the highest transfer price possible when the manufacturing unit sells to the marketing unit b) establish the lowest transfer price possible when the manufacturing unit sells to the marketing unit c) stop producing in the low-tax rate country d) stop selling (marketing) products in the high-tax rate countryIn the Southern Company Managerial Challenge, which alternative for complying with the Clean Air Act creates the greatest real option value? How exactly does that alternative save money? Why? Explain why installing a scrubber “burns” this option.The Bowman Corporation has an $13 million bond obligation outstanding that it is considering refunding. Though the bonds were initially issued at 10 percent, the interest rates on similar issues have declined to 8.4 percent. The bonds were originally issued for 20 years and have 10 years remaining. The new issue would be for 10 years. There is a 9 percent call premium on the old issue. The underwriting cost on the new $13,000,000 issue is $430,000, and the underwriting cost on the old issue was $320,000. The company is in a 35 percent tax bracket, and it will use an 12 percent discount rate to analyze the refunding decision. Use Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods. Calculate the present value of total outflows. Note: Do not round intermediate calculations and round your answer to 2 decimal places. Calculate the present value of total inflows. Note: Do not round intermediate calculations and round…