30-year bond has a 7% (once a year) coupon and an 8% yield to maturity. A) What is the modified duration? B) Without using convexity, if the yield changes to 10%, how much will the price of the bond change (in %)?

The CEO of Kingdom Ltd. is considering whether or not to convert the firm’s current all-equity capital structure to one that has 50% debt (by retiring equity and leaving its total value unchanged). Currently, the firm has 1,000 shares outstanding and its share price is $40. The firm’s business is quite mature and it expects to generate stable annual earnings before interest and tax (EBIT) at $2,000 forever. As the firm has no further growth opportunities, it practices a 100% dividend payout policy. The market interest rate on borrowing is 8%. Brian Ng, a major shareholder of the firm, owns 20% of the total shares. Assume there is no tax and all other assumptions in the M&M model are met, and that the share price does not change during the capital structure conversion. a.Compute the annual payout to Brian under BOTH the all-equity and the levered capital structure. Assume that he will keep all his 200 shares under the levered capital structure. b.If the firm decides to change to the new capital structure, show how Brian can use homemade leverage to resemble his payoff under the all-equity capital structure. Explain and comment on the implication of this.

14) B Markets has sales of $848,600, net income of $94,000, dividends paid of $28,200, total assets of $913,600, and current liabilities of $78,900. Assume that all costs, assets, and current liabilities change spontaneously with sales. The tax rate and dividend payout ratios remain constant. If the firm's managers project a firm growth rate of 15 percent for next year, what will be the amount of external financing needed to support this level of growth? Assume the firm is currently operating at full capacity.

A: $49,535

B: $68,211

C: −$10,406

D: $13,909

E; $32,408

ICU Window, INC.is trying to determine its cost of debt. The firm has a debt issue outstanding with 11 years to maturity that is quoted at 111 percent of face value. The issue makes semiannual payments and has an embedded cost of 8.2 percent annually.

a. What is the company's pretax cost of debt?

b. If the tax rate is 24 percent, what is the after tax cost of debt?

a. Pretax cost of debt
   b. After tax cost of debt

Provide actual examples for each factor:
- Interest rate differentials
- Inflation rate differentials
- Country’s incoming level differentials
- Change in government controls such as international barriers
- Change in expectations of future exchange rates

What are some considerations to keep in mind when determining strategies for structuring real estate deals?  

A small company heats its building and spends ​$8,400 per year on natural gas for this purpose. Cost increases of natural gas are expected to be 8​% per year starting one year from now​ (i.e., the first cash flow is ​$9,072 at EOY​ one). Their maintenance on the gas furnace is ​$345per​ year, and this expense is expected to increase by 12​% per year starting one year from now​ (i.e., the first cash flow for this expense is ​$386.4 at the EOY​ one). If the planning horizon is 14 ​years, what is the total annual equivalent expense for operating and maintaining the​ furnace? The interest rate is 15​% per year.

discrete compounding when iequals=8​% per year.

discrete compounding when iequals=12

discrete compounding when iequals=15​% per year.

Buffelhead’s stock price is $220 and could halve or double in each six–month period (equivalent to a standard deviation of 98%). Suppose that you own a one–year American put option on Buffelhead stock with an exercise price of $220. The interest rate is 20% a year.

(a) Calculate the value of the put.
(b) Now compare the value with that of an equivalent European put option.

7.        Calculate the annual purchasing power over the term of a 5-year loan of provided to Shane Kavanagh, a 37-year old bricklayer. The interest-only loan of $80,000 requiring annual repayments in arrears was made by the Beneficial Finance Agency on a variable interest rate basis. The variable interest rate over the loan term was as follows:

            Details             Year 1              Year 2              Year 3              Year 4              Year 5

            Interest rate       7%                    8%                 8.5%               9.2%                  9%

            Other details over this period are shown below:

            Details             Year 1              Year 2              Year 3              Year 4              Year 5

            Inflows:

            Salary              $65,000           $75,000           $82,000           $88,000           $90,000

            Investments     $5,000              $10,000           $12,000           $11,000           $78,000

            Outflows:

            Taxation          $ 8,000           $10,000           $14,000           $16,000           $15,000

A German company expects to pay 5 million Australian Dollars (AUD in 3 months. a. Name 3 principal methods to do so b. How could the German company hedge its currency risk using futures contracts traded on the Chicago Mercantile Exchange (CME)? What contracts could the company enter into? How many would the company enter into? Buy or sell them?

WACC
Williams, Inc., has compiled the following information on its financing costs:

The company is in the 21 percent tax bracket and has a target debt-equity ratio of 60 percent. The target short-term debt/long-term debt ratio is 20 percent.

a. What is the company's weighted average cost of capital using book value weights?
b. What is the company's weighted average cost of capital using market value weights?
c. What is the company's weighted average cost of capital using target capital structure weights?

d. What is the difference between WACCs? Which is the correct WACC to use for project evaluation?

Show all the steps and don't round off calculations.

Machine cost = $500,000

Project life = 2 years

Tax allowance for machine = 20% (reducing balance method)

Tax rate = 15% (payable half in the current year)

Cost of capital before tax = 10%

General rate of inflation = 4%

The incremental cash inflows from project = $2 million p.a (in today’s value)

The resale value of the machine is calculated at the end of the project to be the same as the net book value of the asset at the time of sale.

Compute the NPV.

Stock Dividends
The owners' equity accounts for Octagon International are shown here:

Common stock ($1 par value) $ 25,000
Capital surplus 135,000
Retained earnings 487,600
Total owners' equity $647,600

a. If the company's stock currently sells for $39 per share and a 10 percent stock dividend is declared, how many new shares will be distributed? Show how the equity accounts would change.

b. If the company declared a 25 percent stock dividend, how would the accounts change?

Show all the steps and don't round off calculations.