Questions
Suppose that the current one-year rate and expected one-year T-bill rates over the following three years...
Suppose that the current one-year rate and expected one-year T-bill rates over the following three years (i.e., years 2, 3, and 4, respectively) are as follows:
1R1 = 1.88%, E(2r1) =2.99%, E(3r1) = 4.56%, E(4r1) = 5.65%
Using the unbiased expectations theory, calculate the current rate for three-year-maturity Treasury securities
(Write your answer in percentage not decimal for example 5.78%)
current rate for three-year-maturity =
In: Finance
You are considering either buying a computer or leasing one $725 per year (paid at the beginning of the year) for 3 years.
You are considering either buying a computer or leasing one $725 per year (paid at the beginning of the year) for 3 years. The current value of the computer is $2,000. You don’t have that much cash but you can get a loan for 8%. Which would cost less, buying or leasing? (Must show a solution to receive full credit.)
In: Finance
Playgrounds, Inc., is granted a distribution franchise by Shady Products in Year 1. Operations are profitable until Year 4 when
Playgrounds, Inc., is granted a distribution franchise by Shady Products in Year 1. Operations are profitable until Year 4 when some of the company’s inventories are confiscated and large legal expenses are incurred. Playgrounds’ tax rate is 50% each year (all expenses and costs are tax deductible). Relevant income statement data are (in thousands):
Required:
Compute tax expense for each of the Years 1 through 8, and present comparative income statements for these years (assume a 3-year carryback period, a 20-year carryforward period for any losses, and a 100% valuation allowance for the loss carryforward).
In: Finance
Fortune Cookie Inc. (FCI) issued $10 million of 10-year, 5% convertible bonds on April 1, Year...
Fortune Cookie Inc. (FCI) issued $10 million of 10-year, 5% convertible bonds on April 1, Year 5 at 102.5 Coupons are payable on April 1 and October 1. Bonds without conversion privileges would have sold at 101.5. FCI’s fiscal year-end is December 31. Please assume that FCI follows IFRS.
(1) On October 1, Year 10, 30% of these bonds were converted to common shares right after the payment of interest. Determine the amount to be assigned to common shares at the time of conversion. [7 marks]
(2) On December 31, Year 10, additional 30% of these bonds were converted to common shares. Accrued interest was paid at the time of conversion. Determine the amount to be assigned to common shares at the time of conversion.
In: Accounting
The annual sales for Salco, Inc. were $4.52 million last year. The firm's end-of-year balance sheet was as follows:
(Financial statement analysis) The annual sales for Salco, Inc. were $4.52 million last year. The firm's end-of-year balance sheet was as follows:
Current assets $503,000 Liabilities $994,000
Net Fixed Assets 1,485,000 Owners Equity 994,000
Total Assets: $1,988,000 Total : $1,988,000
Salco's income statement for the year was as follows:
Sales $4,520,000
Less: Cost of goods sold (3,503,000)
Gross profit $1,017,000
Less: Operating expenses (505,000)
Net operating income $512,000
Less: Interest expense (97,000)
Earnings before taxes $415,000
Less: Taxes (35%) (145,250)
Net income $269,750
Please Answer The Following:
A: Calculate Salco's total asset turnover, operating profit margin, and operating return on assets.
B: Salco plans to renovate one of its plants and the renovation will require an added investment in plant and equipment of $1.05 Million. The firm will maintain its present debt ratio of 50% when financing the new investment and expects sales to remain constant. The operating profit margin will rise to 13.3%. What will be the new operating return on assets ratio (i.e., net operating income÷total assets) for Salco after the plant's renovation?
C. Given that the plant renovation in part (b) occurs and Salco's interest expense rises by $52,000 per year, what will be the return earned on the common stockholders' investment? Compare this rate of return with that earned before the renovation. Based on this comparison, did the renovation have a favorable effect on the profitability of the firm?
In: Finance
William, a 42 year old bachelor, pays $450 per month support for his 75-year old mother...
William, a 42 year old bachelor, pays $450 per month support for his 75-year old mother who is disabled and living in a rest home. She receives a taxable pension of $100 per month and uses the entire $550 per month for routine living expense.
Calculate number of exemptions that could be claimed and the standard deduction that the tax payer is entitled to take in 2019 in the above case.
In: Accounting
1st year Assets 115,028 Liabilities 59,924 2nd year Assets 132,081 Liabilities 42,128 Owner Investment ? Net...
1st year Assets 115,028
Liabilities 59,924
2nd year Assets 132,081
Liabilities 42,128
Owner Investment ?
Net Income 15,536
Owner Cash Withdrawl 4690
What is the owner's investment for year 2nd?
Please show complete calculation.
In: Accounting
Interest rates on 4-year Treasury securities are currently 6.4%,while 6-year Treasury securities yield 7.55%. If...
Interest rates on 4-year Treasury securities are currently 6.4%, while 6-year Treasury securities yield 7.55%. If the pure expectations theory is correct, what does the market believe that 2-year securities will be yielding 4 years from now? Calculate the yield using a geometric average. Do not round intermediate calculations. Round your answer to two decimal places.
In: Finance
Price a 3-year, 2% annual coupon, $1000 par bond using the following calibrated model for one-year...
Price a 3-year, 2% annual coupon, $1000 par bond using the following calibrated model for one-year interest rate. All rates are expressed on a bond equivalent basis. Assume annual compounding. Round your answer to 2 decimal places. t = 0 t = 1 t = 2 r_2,HH = 0.043 r_1,H = 0.021 r_0 = 0.012 r_2,HL = 0.026 r_1,L = 0.016 r_2,LL = 0.02
In: Finance
Interest rates on 4-year Treasury securities are currently 7%, while 6-year Treasury securities yield 7.4%. If...
Interest rates on 4-year Treasury securities are currently 7%, while 6-year Treasury securities yield 7.4%. If the pure expectations theory is correct, what does the market believe that 2-year securities will be yielding 4 years from now? Calculate the yield using a geometric average. Do not round intermediate calculations. Round your answer to two decimal places.
In: Finance