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1) If the firm has flotation costs of 20% and doesn’t wish to pay more than 17% return for particular security issue. Find out the rate of return the firm willing to offer the investor?

i) 3.4%
ii) 13.6%
iii) 20.4%
iv) 21.25%

2) Bank has $200 million in checking deposits with the interest and non-interest costs of= 4%, $400 million in savings and time deposits with a interest and non-interest costs of= 8%, and $200 million in equity capital with cost of= 24%. The bank has evaluated that uncollected balances, deposit insurance fees and reserve requirements, decrease amount of money available on checking deposits by 10% and on savings and time deposits by 5%. Determine the bank's before-tax cost of funds?

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M914458

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