Corporate Finance (The Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
11th Edition
ISBN: 9780077861759
Author: Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher: McGraw-Hill Education
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Textbook Question
Chapter 18, Problem 3CQ
FTE What is the main difference between the FTE approach and the other two approaches?
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Problem 4.
Consider the following balance sheet for Watchover Savings Incorporated (in millions):
Assets
Liabilities and Equity
Floating-rate mortgages (currently 12%
per annum)
Now deposits (currently 8% per
$ 82 annum)
$ 116
30-year fixed-rate loans (currently 9%
per annum)
5-year time deposits (currently 8% per
101 annum)
29
Equity
38
$ 183 Total
$ 183
Total
a. What is Watchover's expected net interest income at year-end?
b. What will be the net interest income at year-end if interest rates rise by 3 percent?
c. Using the one-year cumulative repricing gap model, what is the change in the expected net
interest income for a 3 percent increase in interest rates?
You are given the following information for Frankenson Pizza Company: Sales = $72,000; Costs = $32,300; Addition to retained earnings = $6,500; Dividends paid = $2,220; Interest expense = $5,200; Tax rate = 23 percent. Calculate the depreciation expense.
Note: Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.
Assume coupons are paid annually. Here are the prices of three bonds with 10-year maturities. Assume face value is $100.
Bond Coupon (%) Price (%)
2
4
8
81.62
98.39
133.42
a. What is the yield to maturity of each bond?
b. What is the duration of each bond?
Complete this question by entering your answers in the tabs below.
Required A
Required B
What is the yield to maturity of each bond?
Note: Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.
Bond Coupon (%)
YTM
2
%
4
8
%
%
Required A
Required R
Required B
What is the duration of each bond?
Note: Do not round intermediate calculations. Round your answers to 2 decimal places.
Bond Coupon (%)
Duration
2
years
4
years
8
years
Chapter 18 Solutions
Corporate Finance (The Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
Ch. 18 - APV How is the APV of a project calculated?Ch. 18 - WACC and APV What is the main difference between...Ch. 18 - FTE What is the main difference between the FTE...Ch. 18 - Prob. 4CQCh. 18 - Prob. 5CQCh. 18 - NPV and APV Zoso is a rental car company that is...Ch. 18 - APV Gemini, Inc., an all-equity firm, is...Ch. 18 - Prob. 3QPCh. 18 - Prob. 4QPCh. 18 - Prob. 5QP
Ch. 18 - Prob. 6QPCh. 18 - Prob. 7QPCh. 18 - WACC National Electric Company (NEC) is...Ch. 18 - WACC Bolero, Inc., has compiled the following...Ch. 18 - Prob. 10QPCh. 18 - Prob. 11QPCh. 18 - APV MVP, Inc., has produced rodeo supplies for...Ch. 18 - Prob. 13QPCh. 18 - Prob. 14QPCh. 18 - Prob. 15QPCh. 18 - Prob. 16QPCh. 18 - Prob. 17QPCh. 18 - Prob. 18QPCh. 18 - Prob. 1MC
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