A petroleum exploration company takes a short-term bank loan in order to finance the purchase of several truck-mounted, vibroseis shakers, which have unexpectedly come onto the market at a good price. Once the purchase is made, the company will obtain long-term financing Which of the following best describes the short-term loan the company has taken? OA. an uncommitted line of credit OB. bridge loan OC. promissary note OD. single, end-of-period payment loan OE. evergreen credit
Q: L.A. Clothing has expected earnings before interest and taxes of $1,900, an unlevered cost of…
A: A business with no debt in its capital structure is called an unleveled firm or an all-equity firm.…
Q: a) why they have been paying the same sum every month, when they are sure that the amount of money…
A: a. An amortized loan is a type of loan where the borrower makes regular, fixed payments over a…
Q: You are serving on a jury. A plaintiff is suing the city for injuries sustained after a freak…
A: The time value of money (TVM) is a concept that states that the worth of the money in hand today is…
Q: You want to receive $700 at the end of each month for 5years. Interest is 8.1% compounded monthly…
A: Calculating the present value is especially helpful when planning for retirement. To determine the…
Q: Suppose in the grad school question (two above), the tuition obligations have a Macaulay duration of…
A: A certain portfolio of two bonds is required to immunize the payment obligations such that the…
Q: The NPV of two mutually exclusive projects considering different discount rates are given as…
A: We use capital budgeting and its tools like NPV,, 99, 254); position: relative; display:…
Q: Which of the following best describes the terms 'long position' and 'short position' in trading?…
A: Trading in the financial markets is often based on speculating future price movements of assets such…
Q: maintenance is P20,000.00. If money is worth 14% per annum, determine the number of days per year a…
A: First we need to determine the Equivalent Annual Cost (AEC) of owning the truck. AEC is the cost of…
Q: Spot Rate 1 $-30.60 B 3Mth Forward Rate 1$ = 30.50 B US flation Rate 3% terest Rate 3% ΤΗ 2% 2%
A: According to International Fisher Effect (IFE), the future spot rate between Bhatt and US dollar is…
Q: R150 000 is invested at a compound interest rate that is compounded quarterly. After 6 years the…
A: An annuity is a financial product or investment contract that provides a series of regular payments…
Q: Jan sold her house on December 31 and took a $30,000 mortgage as part of the payment. The 10-year…
A: A mortgage is a loan that is used to purchase a property, typically a home. The borrower agrees to…
Q: 2. Present value. Agatha owns a savings account which compounds interest annually at a rate of 4%…
A: Present value is the equivalent value today based on the time and interest rate that would give…
Q: e choice between the two options? If the interest rate is greater than the indifference rate, which…
A: Present value is the equivalent value today of the future cash flow based on the time and interest…
Q: Your project expenditures are listed below. Your project customer wants to fund you $30,000 now…
A: To create an action plan for your next steps, you will need to consider the following steps: Review…
Q: Your grandfather wants to establish a scholarship in his father’s name at a local university and has…
A: Perpetuity type of annuity pay the money forever and the present value of perpetuity depends on the…
Q: ume that one year ago, you bought 220 shares of a mutual fund for $25 per share and that you…
A: Rate of return is the total amount of profit earned on the initial investment done and it is the sum…
Q: Annual % rate: 5.9% Amt of Mort: $180,000 Unpaid Balance: Monthly Payent: $1067.65 Number of Monthly…
A: Loans are paid by equal monthly payments and the unpaid balance is the present value of payments…
Q: Calculate the NPV of the proposed investment, using the inputs suggested in this case. How sensitive…
A: The following spreadsheet was created by Libby Flannery to examine the NPV of the proposed…
Q: Which exchange is known for offering interchangeable contracts? Tokyo Stock Exchange (TSE) New…
A: A stock exchange works as a mediator, its main goal is to make it easier for buyers and sellers to…
Q: (J) A borrower has two alternatives for a loan: (1) issue a $185,000, 60-day, 4% note or (2) issue a…
A: Issue amount185000Interest rate4%Duration of issuance (in days)60Number of days in a…
Q: Mulherin's stock has a beta of 1.34, its required return is 8.33%, and the risk-free rate is 2.30%.…
A: Beta = b = 1.34Required Return = r = 8.33%Risk free rate = rf = 2.30%
Q: Investment Timing Option: Decision-Tree Analysis The Karns Oil Company is deciding whether to drill…
A: It is a case where the net present value of the project is to be calculated. It will help decide the…
Q: What is the NPV if the firm replaces the old welder with the new one?
A: We are going to determine the NPV of the project using the logic below. Net present value (NPV)…
Q: 4. The dividends that Firm A pays to its stockholders are expected to grow at 18% a year for the…
A: The Dividend Discount Model (DDM) is a valuation method used to estimate the fair value of a stock…
Q: Each stock's rate of return in a given year consists of a dividend yield (which might be zero) plus…
A: The problem case deals with the method used to calculate the value of the S&P 500 index. It is…
Q: Use the following information to find the external financing needed (EFN): Current sales: $6,000;…
A: In order to finance its anticipated development or expansion plans, a firm needs raise more cash…
Q: Suppose you purchase a 10-year bond with 6.6% annual coupons. You hold the bond for four years,…
A: A bond is a kind of debt security issued by the government and private companies for raising funds…
Q: Investors who have to depend current income from their investments to supplement their living…
A: When it comes to investing, each individual has unique financial objectives. Those who rely on their…
Q: Christine Norton-Hines is a young Hollywood writer who is well on her way to television…
A: “Hi There, thanks for posting the question. But as per Q&A guidelines, we must answer the first…
Q: During the first quarter of 2015, Toronto Dominion Bank (TD) stock cost $45 per share and was…
A: Dividend yield refers to the ratio of the annual dividends that a company pays for a share as…
Q: A university student painter is considering the purchase of a new air compressor and paint gun to…
A: The term net present value, or NPV, refers to the current total worth of a future stream of…
Q: In year 1, a fund increases from $179mm to $186mm (gross asset value). The fund has a 3/15 structure…
A: The structure 3/15 indicates that the management fee is 3% of the entire funds or assets under…
Q: Dayo is long a bear spread with strike prices 9.00 and 19.00. The ons expire in 12 months, the spot…
A: A long bear spread Strategy:Buy a lower strike put option: The trader buys a put option with a lower…
Q: 3. Consider Table 2, which outlines the investment and operating cash flows for three projects. PV…
A: NPV represents the amount of worth generated by an investment and is expressed in absolute dollar…
Q: Your client, Bo Regard, holds a complete portfolio that consists of a portfolio of risky at (P) and…
A: Standard deviation is a statistical measure of risk of return of the stock and is measured as the…
Q: A Chevrolet Sonic hatchback costs 14,450.00. With a 13% down payment you can have amortized loan for…
A: Given: Variables in the question:Cost of Chevrolet Sonic hatchback=$14,450Down payment=13%N=9…
Q: Tamarisk Corp. is planning to replace an old asset with new equipment that will operate more…
A: Capital budgeting is an essential tool that helps companies reduce risks, increase returns on…
Q: Beyer Company is considering buying an asset for $270,000. It is expected to produce the following…
A: Initial Investment = $270,000
Q: Gomez is considering a $195,000 Investment with the following net cash flows. Gomez requires a 12%…
A: 1. Net present value is a capital budgeting technique used for making investment decisions.NPV =…
Q: Anderson Inc. uses packing machines to prepare their product for shipping. One machine costs…
A: Present value annuity factor is computed as follows:-PVAF = where,, 99, 254); position: relative;…
Q: The below table shows the list of prices for puts expiring in 30 days (T = 1/12). Using the put…
A: We are given the following details related to a put option:Current stock price: $234.35Risk-free…
Q: You Save Bank has a unique account. If you deposit $7,250 today, the bank will pay you an annual…
A: In this case, the bank uses different interest rates for different periods, so we'll need to apply…
Q: 1) ABC pays an annual dividend, and it has reached its matured stage. Management thinks that they…
A: Dividend paid$4.50Market required return6.50%Growth rate4%Required: a) ABC's Fair stock price=?b1)…
Q: Bill Bob paid $1,100 for a 15-year bond 10-years ago. The bond pays a coupon of 8 percent…
A: We will be using Excel function, =RATE to find realized yield.=RATE(nper,pmt,pv,FV,type,guess)
Q: Suppose you are given the following information about the default- free, coupon-paying yield curve:…
A: Here,Maturity123Coupon Rate0%10%6%YTM3.000%4.908%6.840%
Q: A bond has a stated coupon rate of 6% and was issued 10 years ago and has 3 years left to maturity.…
A: A bond is a kind of debt security issued by the government and private companies to the public for…
Q: Consider the two savings plans below. Compare the balances in each plan after 9 years. Which person…
A: Future value refers to the value of an investment or asset at a specific point in the future, taking…
Q: Currently the S&P is returning 11% while Treasury bonds are returning 2%. If a stock has a beta of…
A: The required return for a stock is the minimum rate of return that an investor expects to earn from…
Q: Which of the following is a remedy for the Agency Problem in the U.S.? Shareholders have the…
A: The Agency Problem refers to the conflict of interest between shareholders (owners) and management…
Q: Foundation, Incorporated, is comparing two different capital structures: an all-equity plan (Plan I)…
A: Shares outstanding (Plan 1) = 200,000 Shares outstanding (Plan 2) = 150,000Debt value (Plan 2) =…
Step by step
Solved in 3 steps
- LLCR (Loan Life Coverage Ratio)tells the banker if there is enough cash from the project to make bridge-financing even when some years are expected to have inadequate cashflows to service the debt. a.The information given above is not sufficient to judge b.Uncertain c.True d.FalseSuppose a credit analyst for JPMorgan Chase, an American multinational financial services company headquartered in New York City and the world's largest bank by market capitalization, is considering a proposal to extend a short-term, one-month loan to Apple, Inc., an American multinational technology company headquartered in Cupertino, California. Which of the following financial statement ratios would best help the credit analyst assess Apple, Inc.'s ability to repay the short-term loan? O Days' sales in receivables. O The cash ratio. O The current ratio. O The return on equity ratio (ROE).A lending officer at C Bank has insisted that your firm improve the current ratio of 0.8 before the bank will consider a loan. Which of the following actions would INCREASE the ratio? Group of answer choices: Selling some of the existing inventory at cost Using cash to pay off current liabilities Borrowing long-term debt to pay off short-term bank loan Paying off long-term debt. Collecting some of the current accounts receivable
- 5. Sources of short-term financing Short-term credit, or short-term financing, is any liability that is scheduled for repayment within one year. Sources of short-term funds include banks, suppliers, securities firms, and insurance companies. The obligations are in the form of bank loans, trade credit, commercial paper, secured loans, and accruals. Some types of short-term financing are easier to obtain and manage than others. Financial managers will consider the costs of the various sources of financing as part of a cash management strategy. The following statement refers to a source of short-term credit. Select the best term to complete the sentence. as a source of financing is restricted to large firms with exceptionally good credit. The use of Newell Enterprises is a very large manufacturing company. Newell's financial managers use many sources of financing for the company's annual borrowings, which exceed $100 million. Newell's credit rating is excellent. At the moment, the…Small banks can participate in loans far in excess of their asset size by a. buying financial futures contracts b. by selling loans downstream c. achieving economies of scope d. buying participations If a firm is using financial leverage successfully, the ROE should be a. lower than if no leverage were used b. higher than the profit margin c. higher than ROA d. higher than if no leverage were used Credit card fee income comes from a. late payments b. exceeding credit lines c. all of the above d. cash advancesImagine that you are in the position of buying loans in the secondary market (that is, buying the right to collect the payments on loans ) for a bank or othe r financia l services company.Explain why you would be willing to pay more or less for a given loan if: a. The borrower has been late on a number of loan payments b. Interest rates in the economy as a whole have risen since the bank made the loan c. The borrower is a firm that has just declared a high level of profits d. Interest rates in the economy as a whole have fallen since the bank made the loan
- Toms UI IVesuTment to ychciut ed as a cost of borrowing to compensate the opportunity costs of the bank with I to the cash loaned to you. Moreover, the interest rate is usually expressed as nual percentage rate. activity ctions: On the space provided, write TRUE if the idea being expressed is correct and FALSE if otherwise. 1. In the most loan amortization schedules, amortization of discount or premium of the loan increases over time. 2. The process of obtaining future values is called discounting. 3. An annuity in which cash flows occur at the end of each period is called annuity. ageOption 1: Merit could approach JPMorgan Chas, a bank that had served Merit well for many years with seasonal credit lines as well as medium-te loans. Lehn believed that JPMorgan was unlikely to make a $4 billion loan to Merit on its own, but it could probably gather a group of banks together to make a loan of this magnitude. However, the banks would undoubtedly demand that Merit limit further borrowing and provide JPMorgan with periodic financial disclosures so that they could monitor Merit's financial condition as it expanded its operations. Option 2: Merit could convert to pubic ownership, issuin stock to the public in the primary market. With Merit's excellent financial performance in recent years, Sara thought that its stock could command a high price in the market and that many investors would want to participate in any stock offering that Merit conducted. Required: •Pros and cons of option 1 and 2 •Which option do you think Sara should recommend to the board and why?1.) A bank has purchased a significant amount of loan receivables of another bank. The loan portfolio is made up of several home mortgages, making it essentially a mortgage-backed security. The investing bank has created its cashflow forecast from the receivable but faces the risk that if interest rates decline, principal payments will be made earlier and that interest collections will not happen. What risk does the bank face?* A.)Mortgage Default Risk B.) Mortgage Prepayment Risk C.) Mortgage Settlement Risk D.) Mortgage Extension Risk 2.) The mortgage contract states that the debtor must pay a minimum of P100,000 per year on the 7% interest, P1,000,000 loan. The balance would be due by the end of the tenth year as a lump sum. A.) Balloon payment mortgage B.) Rollover mortgage C.) Home equity loans D.) Construction to permanent mortgages 3.) Which of the following would have inflationary effect on the economy? [1] BSP releasing new bonds in the market [2] BSP decreasing the repo…
- 1. Explain how a firm that expects to need funds in the upcoming year might make sure the needed funds are available. 2. How does the uncertain nature of a firms sales due to Covid-19 influence its decision regarding the amount of short-term credit to use in its financing strategy? 3. What kinds of firms use commercial paper? Could the grocery shop in neighborhood borrow using this kind of credit? 4. From the standpoint of a borrower, is long-term or short-term credit riskier? Explain. 5. From the standpoint of an investor, is equity or debt riskier? Explain. 6. Give a report(one paragraph) of any company (either local or international) that using venture capital as a source of financing.Unibank also needs to review its off-balance-sheet risk. Using the following balance sheet value of UniBank in market value terms (in millions of dollars) Assets Cash Liquid assets Loans Total assets $ 3 30 55 88 Liabilities and equity Deposits Interbank loan Equity Total liabilities and equity In addition, the bank has contingent assets with $50 million market value and contingent liabilities with $80 million market value. Why do over-the-counter contracts carry more contingent credit risk than exchange-traded contracts? $ 35 5 48 88(Liquidity analysis) When firms enter into loan agreements with their bank, it is very common for the agreement to have a restriction on the minimum current ratio the firm has to maintain. So, it is important that the firm be aware of the effects of their decisions on the current ratio. Consider the situation of Advanced Autoparts (AAP) in 2009. The firm had total current assets of $1,908,026,400 and current liabilities of $1,362,876,000. a. What is the firm's current ratio? b. If the firm were to expand its investment in inventory and finance the expansion by increasing accounts payable, how much could it increase its inventory without reducing the current ratio below 1.2? c. If the company needed to raise its current ratio to 1.5 by reducing its investment in current assets and simultaneously reducing accounts payable and short-term debt, how much would it have to reduce current assets to accomplish this goal? a. What is the firm's current ratio? The firm's current ratio is (Round to…