Questions from Corporate Finance

Q: It is 2030 and the yields on corporate bonds are as follows

It is 2030 and the yields on corporate bonds are as follows: Tau Corp wishes to raise $10 million by an issue of 9% 10-year bonds. What will be the likely issue price (as a percent of face value) if T...

Q: Other things equal, would you expect the difference between the price

Other things equal, would you expect the difference between the price of a Treasury bond and a corporate bond to increase or decrease with a. The company’s business risk? b. The degree of leverage? c...

Q: Square File’s assets are worth $100. It has $80

Square File’s assets are worth $100. It has $80 of zero-coupon debt outstanding that is due to be repaid at the end of two years. The risk-free interest rate is 5%, and the standard deviation of the r...

Q: A friend has mentioned that she has read somewhere that the following

A friend has mentioned that she has read somewhere that the following variables can be used to predict bankruptcy: (a) the company debt ratio; (b) the interest coverage; (c) the amount of cash relativ...

Q: We characterized the interstate rail lines owned by major U.S

We characterized the interstate rail lines owned by major U.S. railroads as “strategic assets” that could generate increased profits. In what conditions would you expect these assets to generate econo...

Q: Look back at Section 23-4. Suppose that the standard

Look back at Section 23-4. Suppose that the standard deviation of the return on Upsilon’s assets is 50%. Recalculate the probability that the company will default.

Q: Look at Table 24.1: a. The AMAT

Look at Table 24.1: a. The AMAT bond was issued on June 8, 2011, at 99.592%. How much would you have to pay to buy one bond delivered on June 15? Don’t forget to include accrued interest. b. When is t...

Q: Suppose that you are a banker responsible for approving corporate loans.

Suppose that you are a banker responsible for approving corporate loans. Nine firms are seeking secured loans. They offer the following assets as collateral: a. Firm A, a heating oil distributor, offe...

Q: Complete the passage below by selecting the most appropriate terms from the

Complete the passage below by selecting the most appropriate terms from the following list: floating lien, revolving credit, medium-term note, warehouse receipt, unsecured, commitment fee, commercial...

Q: Term loans usually require firms to pay a fluctuating interest rate.

Term loans usually require firms to pay a fluctuating interest rate. For example, the interest rate may be set at 1% over LIBOR. LIBOR can sometimes vary by several percentage points within a single...