Effect on the YTM due to increment in interest ratio. Introduction: YTM is basically a return rate of the bond if it is buying at the current price and keeps by the investor till the date of the maturity. YTM is also called market return rate or market interest rate. YTM gives the final return value of the bond after maturity.

Question

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Answer 1

Question

Chapter 14, Problem 28PS

A

Summary Introduction

To explain: Effect on the YTM due to increment in interest ratio.

Introduction: YTM is basically a return rate of the bond if it is buying at the current price and keeps by the investor till the date of the maturity. YTM is also called market return rate or market interest rate. YTM gives the final return value of the bond after maturity.

B

Summary Introduction

To explain: Effect on the YTM if debt-to-equity ratio increases.

Introduction: The debt-to-equity is a ratio of the company’s total liabilities to the share equity of the firm. The firm’s financial leverage is calculated by using this tool. This financial tool establishes a relation between liquidity and shareholder equity value.

C

Summary Introduction

To explain: The effect on the YTM if quick ratio increases.

Introduction: The quick ratio is a financial term that is used to measure the liquidity of the firm. It is also known as the acid test ratio. The quick ratio compares the total amount, the amount on securities, and the equivalent cash amount.

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Crenshaw, Incorporated, is considering the purchase of a $367,000 computer with an economic life of five years. The computer will be fully depreciated over five years using the straight-line method. The market value of the computer will be $67,000 in five years. The computer will replace five office employees whose combined annual salaries are $112,000. The machine will also immediately lower the firm's required net working capital by $87,000. This amount of net working capital will need to be replaced once the machine is sold. The corporate tax rate is 22 percent. The appropriate discount rate is 15 percent. Calculate the NPV of this project. Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. NPV Answer is complete but not entirely correct. S 103,141.80

Your firm is contemplating the purchase of a new $610,000 computer-based order entry system. The system will be depreciated straight-line to zero over its five-year life. It will be worth $66,000 at the end of that time. You will save $240,000 before taxes per year in order processing costs, and you will be able to reduce working capital by $81,000 (this is a one-time reduction). If the tax rate is 21 percent, what is the IRR for this project? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. IRR %

Answer 2

Question

Chapter 14, Problem 28PS

A

Summary Introduction

To explain: Effect on the YTM due to increment in interest ratio.

Introduction: YTM is basically a return rate of the bond if it is buying at the current price and keeps by the investor till the date of the maturity. YTM is also called market return rate or market interest rate. YTM gives the final return value of the bond after maturity.

B

Summary Introduction

To explain: Effect on the YTM if debt-to-equity ratio increases.

Introduction: The debt-to-equity is a ratio of the company’s total liabilities to the share equity of the firm. The firm’s financial leverage is calculated by using this tool. This financial tool establishes a relation between liquidity and shareholder equity value.

C

Summary Introduction

To explain: The effect on the YTM if quick ratio increases.

Introduction: The quick ratio is a financial term that is used to measure the liquidity of the firm. It is also known as the acid test ratio. The quick ratio compares the total amount, the amount on securities, and the equivalent cash amount.

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Answer 3

Question

Chapter 14, Problem 28PS

A

Summary Introduction

To explain: Effect on the YTM due to increment in interest ratio.

Introduction: YTM is basically a return rate of the bond if it is buying at the current price and keeps by the investor till the date of the maturity. YTM is also called market return rate or market interest rate. YTM gives the final return value of the bond after maturity.

B

Summary Introduction

To explain: Effect on the YTM if debt-to-equity ratio increases.

Introduction: The debt-to-equity is a ratio of the company’s total liabilities to the share equity of the firm. The firm’s financial leverage is calculated by using this tool. This financial tool establishes a relation between liquidity and shareholder equity value.

C

Summary Introduction

To explain: The effect on the YTM if quick ratio increases.

Introduction: The quick ratio is a financial term that is used to measure the liquidity of the firm. It is also known as the acid test ratio. The quick ratio compares the total amount, the amount on securities, and the equivalent cash amount.

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Answer 4

Question

Chapter 14, Problem 28PS

A

Summary Introduction

To explain: Effect on the YTM due to increment in interest ratio.

Introduction: YTM is basically a return rate of the bond if it is buying at the current price and keeps by the investor till the date of the maturity. YTM is also called market return rate or market interest rate. YTM gives the final return value of the bond after maturity.

B

Summary Introduction

To explain: Effect on the YTM if debt-to-equity ratio increases.

Introduction: The debt-to-equity is a ratio of the company’s total liabilities to the share equity of the firm. The firm’s financial leverage is calculated by using this tool. This financial tool establishes a relation between liquidity and shareholder equity value.

C

Summary Introduction

To explain: The effect on the YTM if quick ratio increases.

Introduction: The quick ratio is a financial term that is used to measure the liquidity of the firm. It is also known as the acid test ratio. The quick ratio compares the total amount, the amount on securities, and the equivalent cash amount.

Expert Solution & Answer

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Answer 5

Chapter 14, Problem 28PS

A

Summary Introduction

To explain: Effect on the YTM due to increment in interest ratio.

Introduction: YTM is basically a return rate of the bond if it is buying at the current price and keeps by the investor till the date of the maturity. YTM is also called market return rate or market interest rate. YTM gives the final return value of the bond after maturity.

B

Summary Introduction

To explain: Effect on the YTM if debt-to-equity ratio increases.

Introduction: The debt-to-equity is a ratio of the company’s total liabilities to the share equity of the firm. The firm’s financial leverage is calculated by using this tool. This financial tool establishes a relation between liquidity and shareholder equity value.

C

Summary Introduction

To explain: The effect on the YTM if quick ratio increases.

Introduction: The quick ratio is a financial term that is used to measure the liquidity of the firm. It is also known as the acid test ratio. The quick ratio compares the total amount, the amount on securities, and the equivalent cash amount.

Answer 6

Chapter 14, Problem 28PS

A

Summary Introduction

To explain: Effect on the YTM due to increment in interest ratio.

Introduction: YTM is basically a return rate of the bond if it is buying at the current price and keeps by the investor till the date of the maturity. YTM is also called market return rate or market interest rate. YTM gives the final return value of the bond after maturity.

Answer 7

Chapter 14, Problem 28PS

A

Summary Introduction

To explain: Effect on the YTM due to increment in interest ratio.

Introduction: YTM is basically a return rate of the bond if it is buying at the current price and keeps by the investor till the date of the maturity. YTM is also called market return rate or market interest rate. YTM gives the final return value of the bond after maturity.

Answer 8

B

Summary Introduction

To explain: Effect on the YTM if debt-to-equity ratio increases.

Introduction: The debt-to-equity is a ratio of the company’s total liabilities to the share equity of the firm. The firm’s financial leverage is calculated by using this tool. This financial tool establishes a relation between liquidity and shareholder equity value.

Answer 9

B

Summary Introduction

To explain: Effect on the YTM if debt-to-equity ratio increases.

Introduction: The debt-to-equity is a ratio of the company’s total liabilities to the share equity of the firm. The firm’s financial leverage is calculated by using this tool. This financial tool establishes a relation between liquidity and shareholder equity value.

Answer 10

C

Summary Introduction

To explain: The effect on the YTM if quick ratio increases.

Introduction: The quick ratio is a financial term that is used to measure the liquidity of the firm. It is also known as the acid test ratio. The quick ratio compares the total amount, the amount on securities, and the equivalent cash amount.

Answer 11

C

Summary Introduction

To explain: The effect on the YTM if quick ratio increases.

Introduction: The quick ratio is a financial term that is used to measure the liquidity of the firm. It is also known as the acid test ratio. The quick ratio compares the total amount, the amount on securities, and the equivalent cash amount.

Answer 12

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Answer 13

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Answer 14

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Answer 15

Ch. 14 - Prob. 1PS Ch. 14 - Prob. 2PS Ch. 14 - Prob. 3PS Ch. 14 - Prob. 4PS Ch. 14 - Prob. 5PS Ch. 14 - Prob. 6PS Ch. 14 - Prob. 7PS Ch. 14 - Prob. 8PS Ch. 14 - Prob. 9PS Ch. 14 - Prob. 10PS

Solution Summary: The author explains the inverse relationship between bond price and YTM.

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Chapter 14 Solutions