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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Esfandairi Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2,350,000. The fixed asset will be depreciated straight-line to zero over its three-year tax life, after which time it will be worthless. The project is estimated to generate $3,310,000 in annual sales, with costs of $2,330,000. Assume the tax rate is 23 percent and the required return on the project is 11 percent. What is the project's NPV? Note: A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.

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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.

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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