Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Financial Accounting Expert

Problem1. Presently, Warren Industries can sell 15-year, $1,000-par-value bonds paying annual interest at a 12% coupon rate. As the result of current interest rates, the bonds can be sold for $1,010 each; flotation costs of $30 per bond will be acquired in this process. The firm is in the 40% tax bracket.

a. Find the net proceeds from sale of the bond, Nd.

b. Demonstrate the cash flows from the firm’s point of view over the maturity of the bond.

c. Compute 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. Contrast the costs of debt find outd in parts c and d. Which approach do you prefer? Why?
Portfolio betas Rose Berry is attempting to measure two possible portfolios, which comprise the same five assets held in different proportions. She is particularly interested in using beta to compare out the risks of the portfolios, so she has collected the data which is shown in the following table.

Asset     Asset Beta              Portfolio A            Portfolio B    
1               1.3                          10                         30    
2               0.7                          30                         10    
3             1.25                          10                         20    
4              1.1                          10                         20    
5              0.9                          40                         20    
   
a. Compute the betas for portfolios A and B.

b. Compare out the risks of these portfolios to the market as well as to each other. Which portfolio is more risky?

Problem2. Rate of return Douglas Keel, a financial analyst for Orange Industries, wishes to estimation the rate of return for two similar-risk investments, X and Y. Douglas’s research points out that the immediate past returns will serve as reasonable estimates of prospect returns. A year earlier, investment X had a market value of $20,000; investment Y had a market value of $55,000. Throughout the year, investment X generated cash flow of $1,500 and investment Y generated cash flow of $6,800. The current market values of investments X and Y are $21,000 and $55,000, correspondingly.

a. Compute the expected rate of the return on investments X and Y using the most recent year’s data.

b. Supposing that the two investments are equally risky, which one should Douglas suggested? Why?

Financial Accounting, Accounting

  • Category:- Financial Accounting
  • Reference No.:- M93699

Have any Question? 


Related Questions in Financial Accounting

A as stated in the syllabus you are guaranteed a minimum

a. As stated in the syllabus, you are guaranteed a minimum grade based on your class ranking. This class ranking is based in part on your class participation and excludes your homework assignments. Using relevant class c ...

Long-term liability transactionsfollowing are a number of

Long-term Liability Transactions Following are a number of unrelated transactions for the Village of Centerville, some of which affect governmental activities at the government-wide level. None of the transactions has be ...

Select an organization corporate or nonprofit with which

Select an organization (corporate or nonprofit) with which you are somewhat familiar that uses both online and offline channels. Discuss two or three specific examples of how it is taking advantage of the Internet in gen ...

Explain and analyze the external factors on or of

Explain and analyze the external factors on or of international business (e.g., political, legal, economics, culture, etc.) and how these may impact business.

Assignment government-wide statements net assets amp

Assignment: Government-Wide Statements, Net Assets, & Journals Complete the following activities and submit your answers to your instructor in a Word document formatted to proper APA specifications. Include any relevant ...

Assignemtgammy is considering building a facility to

Assignemt Gammy is considering building a facility to manufacture cupcakes to distribute nationally. Your assignment involves both the calculation of cash flows associated with the new investment under consideration and ...

Prepare the statement of stockholders equity sectionbelow

Prepare the Statement of Stockholders Equity Section Below is a list of accounts and final balances for Quiet Company as of December 31, 2009. Common Stock = $225,000 Long term notes Receivables = $85,000 Bonds Payable = ...

Assignmentconstructive retirement at beginning of year

Assignment Constructive Retirement at Beginning of Year (Effective Interest Method) Able Company issued $690,000 of 7 percent first mortgage bonds on January 1, 20X1, at 103. The bonds mature in 20 years and pay interest ...

Assessmentbullnote some of the assessments in this course

Assessment • Note: Some of the assessments in this course build upon each other, so you are strongly encouraged to complete them in the order in which they are presented. For this assessment, complete Problems 1 and 2. Y ...

Financecarefully work through the analysis of the companys

Finance Carefully work through the analysis of the company's short term financial situation. You will see that the company will be in a negative cash situation three quarters from now. As an adviser to the company you ar ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

WalMart Identification of theory and critical discussion

Drawing on the prescribed text and/or relevant academic literature, produce a paper which discusses the nature of group

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro