Questions from Corporate Finance

Q: An asset costs $590,000 and will be depreciated in

An asset costs $590,000 and will be depreciated in a straight-line manner over its three-year life. It will have no salvage value. The lessor can borrow at 7 percent and the lessee can borrow at 9 per...

Q: You are given the following information concerning options on a particular stock

You are given the following information concerning options on a particular stock: a. What is the intrinsic value of the call option? Of the put option? b. What is the time value of the call option?...

Q: Superior Clamps, Inc., has a capital structure consisting of 7

Superior Clamps, Inc., has a capital structure consisting of 7 million shares of common stock and 900,000 warrants. Each warrant gives its owner the right to purchase one share of newly issued common...

Q: Consider the following cash flows on two mutually exclusive projects:

Consider the following cash flows on two mutually exclusive projects: The cash flows of Project A are expressed in real terms, whereas those of Project B are expressed in nominal terms. The appropri...

Q: Suppose you bought a bond with a 5.8 percent coupon

Suppose you bought a bond with a 5.8 percent coupon rate one year ago for $1,030. The bond sells for $1,059 today. a. Assuming a $1,000 face value, what was your total dollar return on this investment...

Q: In the previous problem, you feel that the values are accurate

In the previous problem, you feel that the values are accurate to within only 610 percent. What are the best-case and worst-case NPVs? (Hint: The price and variable costs for the two existing sets of...

Q: Locate the Treasury bond in Figure 8.4(given below

Locate the Treasury bond in Figure 8.4(given below) maturing in November 2039. Is this a premium or a discount bond? What is its current yield? What is its yield to maturity? What is the bid-ask sprea...

Q: Gemini, Inc., an all-equity firm, is considering

Gemini, Inc., an all-equity firm, is considering an investment of $1.4 million that will be depreciated according to the straight-line method over its four-year life. The project is expected to genera...

Q: You bought a stock three months ago for $62.18

You bought a stock three months ago for $62.18 per share. The stock paid no dividends. The current share price is $65.37. What is the APR of your investment? The EAR?

Q: Southern Alliance Company needs to raise $55 million to start a

Southern Alliance Company needs to raise $55 million to start a new project and will raise the money by selling new bonds. The company will generate no internal equity for the foreseeable future. The...