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A company has a single zero coupon bond outstanding that matures in five years with a face value of $28 million. The current value of the company’s assets is $21 million and the standard deviation of the return on the firm’s assets is 44 percent per year. The risk-free rate is 3 percent per year, compounded continuously. |
| a. |
What is the current market value of the company’s equity? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89.) |
| b. | What is the current market value of the company’s debt? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89.) |
| c. | What is the company’s continuously compounded cost of debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) |
| d. | The company has a new project available. The project has an NPV of $1,700,000. If the company undertakes the project, what will be the new market value of equity? Assume volatility is unchanged. (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89.) |
| e. | Assuming the company undertakes the new project and does not borrow any additional funds, what is the new continuously compounded cost of debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) |
In: Finance
In the following problem, check that it is appropriate to use
the normal approximation to the binomial. Then use the normal
distribution to estimate the requested probabilities.
What are the chances that a person who is murdered actually knew
the murderer? The answer to this question explains why a lot of
police detective work begins with relatives and friends of the
victim! About 61% of people who are murdered actually knew the
person who committed the murder.† Suppose that a detective file in
New Orleans has 66 current unsolved murders. Find the following
probabilities. (Round your answers to four decimal places.)
(a) at least 35 of the victims knew their murderers
(b) at most 48 of the victims knew their murderers
(c) fewer than 30 victims did not know their murderers
(d) more than 20 victims did not know their murderers
In: Math
In: Operations Management
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Jared Lazarus has just been named the new chief executive officer of BluBell Fitness Centers, Inc. In addition to an annual salary of $415,000, his three-year contract states that his compensation will include 18,750 at-the-money European call options on the company’s stock that expire in three years. The current stock price is $49 per share and the standard deviation of the returns on the firm’s stock is 60 percent. The company does not pay a dividend. Treasury bills that mature in three years yield a continuously compounded interest rate of 4 percent. Assume that the annual salary payments occur at the end of the year and that these cash flows should be discounted at a rate of 12 percent. |
| 1)Use the Black-Scholes model to calculate the value of the stock options. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
| 2)Determine the total value of the compensation package on the date the contract is signed. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
In: Finance
Discuss how you would set up control measures in your organization or even your home? What considerations must you include in your risk analysis? How do those differ when analyzing risk for hardware, software, and cloud services?
In: Computer Science
Explain in 2 to 3 lines.
1.When we open a position, the costs are different between an options contract and a futures contract. Explain the difference between a premium and a margin account. Be sure to explain the various types of margins that are required and what costs each type of contract has.
2.Explain the idea of the "cost of carry" as it applies to futures contracts. Specifically, what factors can influence the difference between a spot and futures/forward price in the cost of carry? Now explain "convergence" as it relates to spot and futures prices as well as the cost of carry.
In: Finance
Two blocks of mass mA = 5kg and mB = 7kg are connected by a cable of negligible mass on a pulley. The
pulley rotates on a frictionless axle, the cable doesn’t slip on the pulley, it has a radius r = 4cm and a mass mp = 10g. Block A is on an inclined ramp at an angle θ = 30◦ above the ground and there is a coefficent of
friction μk = 0.12 between block A and the ramp. Block B sits a distance d = 3m from the ground. The system is released from rest and block B descends. Calculate the speed of block B at the instant just before it hits the ground
In: Physics
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FINANCIAL LEVERAGE EFFECTS Firms HL and LL are identical except for their financial leverage ratios and the interest rates they pay on debt. Each has $15 million in invested capital, has $3.75 million of EBIT, and is in the 40% federal-plus-state tax bracket. Firm HL, however, has a debt-to-capital ratio of 55% and pays 12% interest on its debt, whereas LL has a 30% debt-to-capital ratio and pays only 10% interest on its debt. Neither firm uses preferred stock in its capital structure.
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In: Finance
To compare between different desalination system different criteria have been used such as: Performance Ration (PR), Gain Output Ratio (GOR), Specific Energy Consumption (kWh/m3 ) and Unit Product Cost ($/m3 ). Define each one and on your opinion which criteria are considered most useful?
In: Mechanical Engineering
Discuss the role of the Joint Commission in health care. Why is Joint Commission accreditation important for health care facilities? What are the Joint Commission standards? 500 words.
In: Nursing
Calculate the present value of the following annuity
streams:
a. $5,000 received each year for 7 years on the
last day of each year if your investments pay 7 percent compounded
annually.
b. $5,000 received each quarter for 7 years on the
last day of each quarter if your investments pay 7 percent
compounded quarterly.
c. $5,000 received each year for 7 years on the
first day of each year if your investments pay 7 percent compounded
annually.
d. $5,000 received each quarter for 7 years on the
first day of each quarter if your investments pay 7 percent
compounded quarterly.
(For all requirements, do not round intermediate
calculations. Round your answers to 2 decimal places. (e.g.,
32.16))
In: Finance
Tennis Skills: State two specific skills that you have gained in playing tennis. Why are these skills important to your well-being?
In: Psychology
Identify the three major pricing strategies and discuss the importance of understanding these strategies when setting prices.?
short answer
In: Operations Management
The Martinezes are planning to refinance their home (assuming that there are no additional finance charges). The outstanding balance on their original loan is $175,000. Their finance company has offered them two options:
Option A: A fixed-rate mortgage at an interest rate of
6.5% per year compounded monthly, payable over a 30-year period in
360 equal monthly installments.
Option B: A fixed-rate mortgage at an interest rate of
6.25% per year compounded monthly, payable over a 12-year period in
144 equal monthly installments.
(a) Find the monthly payment required to amortize each of these
loans over the life of the loan. (Round your answers to the nearest
cent.)
Option A: $
Option B: $
(b) How much interest would the Martinezes save if they chose the
12-year mortgage instead of the 30-year mortgage?
Use the rounded monthly payment values from part (a). (Round your
answer to the nearest cent.)
$
In: Finance
In: Economics