A company's current profit before interest and taxation is $1.1 million and it is expected to remain constant for the foreseeable future.
The company has 4 million shares in issue on which the earnings yield is currently 10%. It also has a $2 million bond in issue with a fixed interest rateof 5%.
The corporate income tax rate is 20% and is expected to remain unchanged.
Which of the following is thebest estimate of the current share price?
WhichTHREE ofthe following remain unchanged over the life of a 10 year fixed rate bond?
A company currently has a 6.25% fixed rate loan but it wishes to change the interest style of the loan to variable by using an interest rate swap directly with the bank.
The bank has quoted the following swap rate:
* 5.50% - 5.55% in exchange for LIBOR
LIBOR is currently 5%.
If the company enters into the swap and LIBOR remains at 5%, what will the company's interest cost be?
Which TWO of the following statements about debt instruments are correct?
HHH Company has a fixed rate loan at 10.0%, but wishes to swap to variable. It can borrow at the risk-free rate +8%. The bank is currently quoting swap rates of 3.1% (bid) and 3.5% (ask). What net rate will HHH Company pay if it enters into the swap?
