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$1,000-par-value bonds paying annual interest at a 12% coupon rate. As a result of
current interest rates, the bonds can be sold for $1,010 each; flotation costs of $30
per bond will be incurred in this process. The firm is in the 40% tax bracket.
a. Find the net proceeds from sale of the bond, Nd.
b. Show the cash flows from the firm’s point of view over the maturity of the bond.
c. Calculate the before-tax and after-tax costs of debt.
d. Use the approximation formula to estimate the before-tax and after-tax costs of
debt.
e. Compare and contrast the costs of debt calculated in parts c and d. Which
approach do you prefer? Why?
from purchase. If the state bonds are to be competitive with U.S. savings bonds, which
pay 8% annual interest (compounded annually), at what price must the state sell its
bonds? Assume no cash payments on savings bonds prior to redemption
identify the factor of decentralization. what is your forethought about sucess and failure of decentralization
Differentiate micro credit and micro finance? identify the major reason growth microfinance
OSAC’s stock is currently selling for $40 per share . The dividend is expected to increase at a constant rate of 7.50% per year and rs, is 9.00%. What is the stock's expected price 3 years from today?
You have decided to endow Faculty of Business, Dokuz Eylul University with a scholarship. It is expected to cost $6,000 per year to attend the university into perpetuity. You expect to give the university the endowment in 6 years and will accumulate it by making equal annual (end-of-year) deposits into an account. The rate of interest is expected to be 13% for all future time periods.
a. How large must the endowment be?
b. How much must you deposit at the end of each of the next 6 years to accumulate the required amount?
You decide to begin saving toward the purchase of a new car in 5 years. If you put $1.000 at the end of each of the next 5 years in a saving account paying 6 percent compounded annually, how much will you accumulate after 5 years? What would be the ending amount if the payment were made at the beginning of each year? What would be the ending amount if $500 payments were made at the end of each of 6-month period for 5 years and the account paid 6 percent compounded semiannually?
Suppose you are estimating parameters of the following regression model:
Ŷt = 9941 + 0.25 X2t+ 15125 X3t
(6114) (0.121) (7349)
R 2= 0.87, RSS = 10310
(The figures in parentheses are the estimated standard errors. RSS are residual sum of squares.)
(i) Comment on the signs of the variables in the model.
(ii) Interpret and explain individual coefficients.
(iii) Suppose X3 increases by 0.25; what is the expected impact of this change on Y?
(iv) Comment on the explanatory power of the regression.
(v) Using t-tests show whether individual coefficients are significantly different from zero at 5% level of significance.
(vi) Test whether the coefficient of X2 is significantly different from 1 at 5% level of significance.
(vii) Carry out an appropriate test to check if coefficients are jointly significant.
