Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Basic Finance Expert

A financial manager is considering two possible sources of funds necessary to finance a $10,000,000 investment that will yield $1,500,000 before interest and taxes. Alternative one is a short-term commercial bank loan with an interest rate of 8 percent for one year. The alternative is a five-year term loan with an interest rate of 10 percent. The firm's income tax rate is 30 percent.

a. What will be the firm's projected earnings under each alternative for the first year?

b. The financial manager expects short-term rates to rise to 11 percent in the second year. At that time long-term rates will have risen to 12%. What will be the firm's projected earnings under each alternative in the second year?

c. What are the crucial considerations when selecting between short- and long-term sources of finance?

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M941506

Have any Question? 


Related Questions in Basic Finance

Company x has a 7 percent semiannual coupon bonds that

Company X has a 7 percent semiannual coupon bonds that sells for $976, has a face value of $1,000, and has a yield to maturity of 8.079 percent. How many years will it be until this bond matures?

1 which of the gaps in figure 3- 1 do you think represents

1. Which of the gaps in Figure 3- 1 do you think represents the major problem for most firms? How can a company attempt to eliminate the knowledge gap? The communications gap? 2. Compare and contrast the customer service ...

Ethan is investing 50 every month for 20 years the annual

Ethan is investing $50 every month for 20 years. The annual rate is 6%. How much money will Ethan have in 20 years? An investment promises to pay $3,000 yearly for 10 years. The payments are received at the beginning of ...

Flip a set of ten coins one hundred times and record the

Flip a set of ten coins one hundred times, and record the number of heads and tails each time. Construct a frequency distribution of the observed data. Check whether the observed frequency distribution appears to match t ...

1 what is a forward transaction what is a forward contract2

1. What is a forward transaction? What is a forward contract? 2. What is the spot price? What is the settlement date? 3. An opinion column in the Wall Street Journal observes: "Speculators earn a profit by absorbing risk ...

How would a relatively high home inflation rate affect the

How would a relatively high home inflation rate affect the home country's current account, all other thing being equal? How would you expect a weakening home currency to affect the home country's current account, all oth ...

1 may personal financial statements be prepared only for an

1. May personal financial statements be prepared only for an individual? Comment. 2. What is the basic personal financial statement? 3. Is a statement of changes in net worth required when presenting personal financial s ...

What is the weekly risk free rate with continuous

What is the weekly risk free rate with continuous compounding (You do not need to calculate the number exactly...a close approximation will be sufficient). Risk Free Rate = 1.79% nominal rate with one compounding period ...

For the situation described in problem 2 above we expect

For the situation described in problem 2 above we expect elastic interaction loss of 6% and embedment loss of 4%. Compute the revised maximum and minimum preloads ? Sketch the revised, preloaded joint diagram ? Compute t ...

In 2009 daryl bought a life insurance policy on his life

In 2009, Daryl bought a life insurance policy on his life with a death benefit of $200,000. He named his wife Melanie the beneficiary of this policy. In 2012, Daryl created an ILIT with Melanie as beneficiary, and transf ...

  • 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

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

Describe what you learned about the impact of economic

Describe what you learned about the impact of economic, social, and demographic trends affecting the US labor environmen