Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Basic Finance Expert

1) John has applied for the revolving credit line of= $6 million to assist in marketing the new product line. Terms of loan are as follows:

a) Will not be the discount loan
b) Commitment fee of 0 percent on the unused portion of the loan will be charged
c) No compensatory balance requirements
d) Bank will pay 4% interest on demand deposits
e) Rate of interest to be charged will be prime rate, 10%, plus 3%

Loan officer evaluates Mr. John will utilize 60% of credit line. Required reserve ratio on demand is 20%. find out effective cost to Mr. John

a) 14.7%
b) 14.9%
c) 15.3%

2) XYZ cushions, non traditional pillow producer, are considering new capital investment project that needs a $40 million investment today. Next year, project will make expected pre tax cash flows of= $2 million, all of which are taxable. Following year, expected cash flows will produce by 2.5%, and constant annual growth will continue everlastingly. Suppose that project will forever be backed by debt equal to 60% of contemporaneous project value. Tax rate is= 34%, debt will have required return= 6% and equity will have required return= 9%. Determine the projected NPV according to WACC method?

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M915129

Have any Question? 


Related Questions in Basic Finance

1 what are the main advantages and disadvantages to

1) What are the main advantages, and disadvantages, to entering a futures hedge? Explain your answer with reference to a futures contract on wheat. Assume the current price is 400 cents per bushel and the futures price i ...

Choose an global industry and consider the following topics

Choose an global industry and consider the following topics: diversification, investment, management, exchange rates or currency forecasts. Which of these would be most significant to your selected industry and how would ...

Create a customized slide templateyou are the owner of a

Create a customized slide template. You are the owner of a mid-sized insurance company. You have 25 agents who travel throughout the country, making presentations to small groups of people (10 to 20) regarding retirement ...

Apple inc is currently equity-financed only with a beta of

Apple Inc. is currently equity-financed only with a beta of 1.1. Its tax rate is 35%. Risk-free rate and market risk premium are both 7%. Calculate the cost of equity if Apple Inc's capital structure consists of 30% debt ...

1 what is the purpose of the accrual tranche could a cmo

1. What is the purpose of the accrual tranche? Could a CMO exist without a Z class? What would be the difference between the CMO with and without the accrual class? 2. Which tranches in a CMO issue are least subject to p ...

Principles of financecorporations often use different costs

Principles of Finance Corporations often use different costs of capital for different operating divisions. Using an example, calculate the weighted cost of capital (WACC). What are some potential issues in using varying ...

1 compare and contrast the role of erp systems and planning

1. Compare and contrast the role of ERP systems and planning systems in enhancing firm performance and competitiveness. 2. Compare and contrast the role of ERP systems and logistics execution systems. 3. Compare and cont ...

1 what is the traditional cash equivalency approach used to

1. What is the traditional cash equivalency approach used to determine how below-market-rate loans affect value? 2. How can the effect of below-market-rate loans on value be determined using investor criteria? 3. ARGUS. ...

Raymond borrowed 300000 from loans r us company the line of

Raymond borrowed $3,000.00 from Loans R Us Company. The line of credit agreement provided for repayment of the loan in equal monthly payments of $668.76 which includes interest of 9.00 % per annum calculated on the unpai ...

There are 1000 students in a high school among the 1000

There are 1000 students in a high school. Among the 1000 students, 150 students take AP Statistics, and 300 students take AP French. 100 students take both AP courses. Let S be the event that a randomly selected student ...

  • 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