You are a market maker in treasury bonds and notes. A customer just sold you $10,000,000 in face value of STRIPS that matures in exactly 17 years. The current yield to maturity on these STRIPS is an effective annual yield of 4%. You know that it will take some time to find a buyer for this bond, so you want to hedge your exposure to changes in the 17-year yield by trading the more liquid 10-year and 30-year STRIPS. The current effective annual yields to maturity are 3% for the 10-year STRIPS and 4.5% for the 30-year STRIPS.

a. Calculate the DV01s for all three STRIPS. When calculating the values of DV01, consider a one basis point change in the effective annual yields.

b. What position in the 10-year STRIPS will hedge your position in the 17-year STRIPS?

c. What posit ion in the 30- year STRIPS will hedge your position in the 17-year STRIPS?

d. How can you decide if you are better hedged with the 10-year STRIPS or the 30-year STRIPS? No calculations are required.

Franklin painting company is considering whether to purchase a new spray paint machine that costs $4,800. the machine is expected to save labor, increasing net income by $720 per year. the effective life of the machine is 15 years according to the manufacturer’s estimate. required determine the unadjusted rate of return based on the average cost of the investment.

Shrieves casting company is considering adding a new line to its product mix, and the capital budgeting analysis is being conducted by sidney johnson, a recently graduated mba. the production line would be set up in unused space in the main plant. the machinery’s invoice price would be approximately $200,000, another $10,000 in shipping charges would be required, and it would cost an additional $30,000 to install the equipment. the machinery has an economic life of 4 years, and shrieves has obtained a special tax ruling that places the equipment in the macrs 3-year class. the machinery is expected to have a salvage value of $25,000 after 4 years of use. the new line would generate incremental sales of 1,250 units per year for 4 years at an incremental cost of $100 per unit in the first year, excluding depreciation. each unit can be sold for $200 in the first year. the sales price and cost are both expected to increase by 3% per year due to inflation. further, to handle the new line, the firm’s net working capital would have to increase by an amount equal to 12% of sales revenues. the firm’s tax rate is 40%, and its overall weighted average cost of capital, which is the risk-adjusted cost of capital for an average project (r), is 10%. define “incremental cash flow.” (1) should you subtract interest expense or dividends when calculating project cash flow?

According to the textbook chapter, “the emotional connection of distinguishing differences and conflict”, which of the following groups of terms describes best the skills/resources that managers need when managing differences in their organization? energy, commitment, tolerance, and appreciation energy, adequate funding, tolerance, and appreciation funding, tolerance, a strong hr department, and tolerance energy, a strong hr department, patience, and strong leadership skills