Answer:
From the strategies provided, the correct debt strategies that will help a corporate borrower eliminate credit risk are strategy 1 and strategy 2, which are; Strategy #1: Borrow $1,000,000 for three years at a fixed rate of interest of 7%. and Strategy #2: Borrow $1,000,000 for three years at a floating rate of LIBOR + 2%, to be reset annually. The current LIBOR rate is 3.50%.
Answer:
12.39%
Explanation:
in order to determine the realized rate of return we need to calculate the yield to call:
YTC formula = {coupon + [(call price - market price)/n]} / [(call price + market price)/2]
YTC = {$120 + [($1,080 - $1,000)/9]} / [($1,080 + $1,000)/2]
YTC = $128.89 / $1,040 = 0.1239 = 12.39%
In this case, the investor's realized rate of return was actually higher than the expected yield to maturity (YTM = 12% since bonds were sold at face value).
Answer:
when sea transportation is used:
safety stock = Z-score x √lead time x standard deviation of demand
- Z-score for 99% = 2.58
- lead time = 36 days
- standard deviation of demand = 4,000 units
safety stock = 2.58 x √36 x 4,000 units = 61,920 units
reorder point = lead time demand + safety stock
- lead time demand = 36 days x 5,000 units = 180,000 units
- safety stock = 61,920
reorder point = 180,000 units + 61,920 units = 241,920 units
when air transportation is used:
safety stock = Z-score x √lead time x standard deviation of demand
- Z-score for 99% = 2.58
- lead time = 4 days
- standard deviation of demand = 4,000 units
safety stock = 2.58 x √4 x 4,000 units = 20,640 units
reorder point = lead time demand + safety stock
- lead time demand = 4 days x 5,000 units = 20,000 units
- safety stock = 20,640
reorder point = 20,000 units + 20,640 units = 40,640 units
Answer:
13.856%
Explanation:
For computing the discounting rate we have to find out the weightage average cost of capital but before that first we have to determine the cost of equity and the after tax cost of debt which is shown below:
Cost of equity = Risk free rate of return + Beta × market risk premium
= 8% + 2 × 4%
= 16%
And, the after cost of debt is
= Cost of debt × ( 1 - tax rate)
= 8% × (1 - 0.34)
= 5.28%
Now the weighted cost of capital is
= Cost of debt × weighted of debt + cost of equity × weighted of equity
= 5.28% × 20% + 16% × 80%
= 1.056% + 12.8%
= 13.856%
