Principles of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
12th Edition
ISBN: 9781259144387
Author: Richard A Brealey, Stewart C Myers, Franklin Allen
Publisher: McGraw-Hill Education
expand_more
expand_more
format_list_bulleted
Videos
Textbook Question
Chapter 19.A, Problem 1Q
The U.S. government has settled a dispute with your company for $16 million. The government is committed to pay this amount in exactly 12 months. However, your company will have to pay tax on the award at a marginal tax rate of 35%. What is the award worth? The one-year Treasury rate is 5.5%.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Space-X Corporation, located in the United States, has an accounts payable obligation of $750 million payable in one year to Mitsubishi Electric of
Japan. The current spot rate is ¥116/$ and the one year forward rate currently is ¥115/S. However, it is expected that the actual spot rate one year
from now could be ¥118/S. The annual interest rate is 3 percent in Japan and 6 percent in the United States. One-year Call Options on ¥ (one Option
round-lot ¥1,000,000) with a Strike/Exercise Price of $0.0086 are currently trading at the Philadelphia Stock Exchange (PHLX) for a premium of
0.012 cents
How many Option round-lots are required for a perfect hedge?
OA 1400
OB. 1500
OC. 903.50
OD.910
An investor purchasing a British consol is entitled to receive annual payments from the British government forever. What is the price of a consol that pays $200 annually if the next payment occurs one year from today? The market interest rate is 4.1 percent..
Williams Corp. is considering signing contracts that will obligate the firm to purchase 100000 Swiss Francs worth of computer equipment at the end of each calendar quarter for the next 2 years. Williams is also signing a contract with a local high school that will purchase this equipment from Williams at a price of $87000 (U.S.) per quarter. What would Williams' profit or loss be over the life of the contract (8 quarters) if the "In US Dollar" exchange rate is $0.85over the life of the contract?$______________________Place your answer to the nearest dollar without a dollar sign or a comma.
Chapter 19 Solutions
Principles of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
Ch. 19.A - The U.S. government has settled a dispute with...Ch. 19.A - Prob. 2QCh. 19 - Prob. 1PSCh. 19 - Prob. 2PSCh. 19 - WACC True or false? Use of the WACC formula...Ch. 19 - Flow-to-equity valuation What is meant by the...Ch. 19 - APV True or false? The APV method a. Starts with a...Ch. 19 - APV A project costs 1 million and has a base-case...Ch. 19 - Prob. 7PSCh. 19 - APV Consider a project lasting one year only. The...
Ch. 19 - WACC The WACC formula seems to imply that debt is...Ch. 19 - Prob. 10PSCh. 19 - Prob. 11PSCh. 19 - WACC Table 19.4 shows a simplified balance sheet...Ch. 19 - WACC How will Rensselaer Felts WACC and cost of...Ch. 19 - APV Digital Organics (DO) has the opportunity to...Ch. 19 - APV Consider another perpetual project like the...Ch. 19 - Prob. 18PSCh. 19 - Prob. 19PSCh. 19 - Prob. 22PSCh. 19 - Company valuation Chiara Companys management has...Ch. 19 - Prob. 25PSCh. 19 - Prob. 26PS
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Similar questions
- Goliath Banking Corporation (GBC) offers an "Income Investment Product" (IIP) for customers. The details for this product is as follows: Customers pay $908.08904319366 to buy an IIP. The IIP will pay out $44 at the end of each year for 9 years The IIP will pay out a further single payment of $1,000 after 9 years There are no further payments after this single payment at time 9. (b) If instead GBC were to offer investors an effective annual return of 4.9376%, what price should they charge for this product? Give your answer in dollars, to the nearest cent. (c) Suppose that GBC decides to delay the final single payment of $1,000 by one year (assume this is permitted in the fine print of the IIP). Assuming no other changes are made, which ONE of the following statements is true for investors that have already purchased the IIP? a. The investors will now receive a lower return on their investment since their payments have been delayed. b. Investors will pay a lower price for this…arrow_forwardThis scenario relates to three requirements. Nesud Co has credit sales of $45 million per year and on average settles accounts with trade payables after 60 days. One of its suppliers has offered the company an early settlement discount of 0.5% for payment within 30 days. Administration costs will be increased by $500 per year if the early settlement discount is taken. Nesud Co buys components worth $1.5 million per year from this supplier. From a different supplier, Nesud Co purchases $2.4 million per year of Component K at a price of $5 per component. Consumption of Component K can be assumed to be at a constant rate throughout the year. The company orders components at the start of each month in order to meet demand and the cost of placing each order is $248.44. The holding cost for Component K is $1.06 per unit per year. The finance director of Nesud Co is concerned that approximately 1% of credit sales turn into irrecoverable debts. In addition, she has been advised that customers…arrow_forwardIf you purchase $27,000 in U.S. Treasury Bills with a discount rate of 4.2% for a period of 26 weeks, what is the effective interest rate? Round to the nearest hundredth percent. Step 1 The effective interest rate on a U.S. Treasury Bill, or T-Bill, is the actual interest rate on a loan to the government and takes into account the fact that the purchaser does not pay the full amount of the T-Bill. It is calculated using the interest, purchase price, and time. The amount of interest on a T-Bill is calculated as follows where the discount rate is given as a decimal and the time will be a fraction whose numerator is the given amount of time in weeks and denominator is 52 weeks. interest = face value ✕ discount rate ✕ time The rate was given to be 4.2%. As a decimal, we have 4.2% = . Calculate the interest (in $) for a $27,000 T-Bill with a discount of 4.2% for 26 weeks. interest = face value ✕ discount rate ✕ time in weeks 52 weeks = $27,000 ✕ ✕ 26…arrow_forward
- MR. MAGBITANG MADE A MONEY MARKET PLACEMENT OF P100,000,000 FOR 30 DAYS AT 12% PER YEAR. IF THE WITHHOLDING TAX IS 20%. WHAT IS THE NET INTEREST THAT MR. MAGBITANG WILL RECEIVE AT THE END OF THE MONTH? O a. P800,600.00 O b. P800,000.00 О с. P600,000.00 O d. P800,100.00arrow_forwardYou are considering purchasing a piece of industrial equipment from the U.S.A. that costs S30,000. You decide to make a down payment in the amount of $5,000 and to borrow the remainder from a local bank at an interest rate of 9%, compounded monthly. The loan is to be paid off in 36 monthly installments. What is the amount of the monthly payment?arrow_forwardA Filipino contractor in the USA plans to purchase a new office building costing P1,000,000. He agrees to pay P150,000 annually for 20 years. At the end of this time, he estimates that he can resell the building for at least P600,000. Instead of buying the building he can lease it for P140,000 a year. All payments are to. be made at the beginning of each year and the rate of interest is 10%. Draw the cashflow diagram for both situations.a) What is the present worth of the purchasing price?b) What is the present worth of the leasing price?c) Should the contractor purchase or lease the building?arrow_forward
- Goliath Banking Corporation (GBC) offers an "Income Investment Product" (IIP) for customers. The details for this product is as follows: Customers pay $941.29024136888 to buy an IIP. The IIP will pay out $49 at the end of each year for 13 years The IIP will pay out a further single payment of $1,000 after 13 years There are no further payments after this single payment at time 13. (a) Calculate the return GBC promised to investors that buy this product, expressed an effective annual rate. Give your answer as a percentage to 4 decimal places. (b) If instead GBC were to offer investors an effective annual return of 3.4571%, what price should they charge for this product? Give your answer in dollars, to the nearest cent. (c) Suppose that GBC decides to delay the final single payment of $1,000 by one year (assume this is permitted in the fine print of the IIP). Assuming no other changes are made, which ONE of the following statements is true for investors that have already purchased…arrow_forwardYou are the treasurer for ABC corporation. You just received a bill from your Italian supplier of Genoa salami for Eur1,000,000. The Euros are due in three months. 1- What is your underlying exposure? ( Are you long or short Euros before you think about hedging? You owe Euros) 2- If the EURUSD 3 month forward exchange rate is $1.15/EUR today. Tomorrow the EURUSD 3 month forward rate rises to $1.18/EURWhen you mark your books to market, what is the gain or loss on the underlying position?arrow_forwardSolve all this question......you will not solve all questions then I will give you down?? upvote....arrow_forward
- You are an analyst in the treasury department of the Maritime Bank (MB). One of your corporate customers is interested in a US$100 million loan for two years. Your bank decides to fund the loan from a yen loan. Your bank agrees to borrow ¥12.8 billion at an interest rate of 1.2 percent, paid semiannually, for a period of two years. It then enters into a two-year yen/dollar swap with Citibank on a notional principal amount of $100 million (¥12.8 billion at the current spot rate). Every six months, MB pays Citibank U.S. dollar 6 M LIBOR, while citibank makes payments to MB of 1.3 percent annually in yen. At maturity, Citibank and MB reverse the notional principals. Assume that LIBOR6 (annualized) and the ¥/$ exchange rate evolve as follows. Calculate the net dollar amount that MB pays to Citibank("-") or receives from BT ("+") each six-month period. Time (months) LIBOR6 ¥/$ (spot) Net $ receipt (+)/payment (-) t 5.7% 128 t + 6…arrow_forwardTo increase its sales, a wholesale company offers its customers a promotion that consists of paying only 30% of the value of the merchandise at the time of delivery and 2 payments of 20 thousand pesos each at 90 and 180 days. If the compound interest rate is 11.45% per year with daily compounding, what is the cash value of said commodity?arrow_forwardPetrol Ibérico. Petrol Ibérico, a European gas company, is borrowing $650,000,000 via a syndicated eurocredit for six years at 100 basis points over LIBOR. LIBOR for the loan will be reset every six months. The funds will be provided by a syndicate of eight leading investment bankers, which will charge up-front fees totaling 1.1% of the principal amount. What is the effective interest cost for the first year if the annual LIBOR is 3.90% during the first six months and 4.20% during the second six months. The effective interest cost for the first year is %. (Round to two decimal places.)arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Intermediate Financial Management (MindTap Course...FinanceISBN:9781337395083Author:Eugene F. Brigham, Phillip R. DavesPublisher:Cengage Learning
EBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENT
Intermediate Financial Management (MindTap Course...
Finance
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Cengage Learning
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:9781337514835
Author:MOYER
Publisher:CENGAGE LEARNING - CONSIGNMENT
How to (Legally) Never Pay Taxes Again; Author: Next Level Life;https://www.youtube.com/watch?v=q63F1pBrUHA;License: Standard Youtube License