SkiingWarm Inc. plans to issue $260 million of bonds with a coupon rate of 8.5%, quarterly coupons, a par value of $10,000, and 15 years to maturity. The current market interest rate on these bonds is 7% and is expected to remain stable for the next two years. The bonds are callable in two years at $10,500. In two years, the interest rate on the bonds will either be 9.25% with a probability of 55% or 6.55% with a probability of 45%. Assume investors are risk neutral. What is the price of the bond today?

Xinhong company is considering replacing one of its manufacturing machines. the machine has a book value of $39,000 and a remaining useful life of 5 years, at which time its salvage value will be zero. it has a current market value of $49,000. variable manufacturing costs are $33,300 per year for this machine. information on two alternative replacement machines follows. alternative a alternative b cost $ 115,000 $ 117,000 variable manufacturing costs per year 22,900 10,100 1. calculate the total change in net income if alternative a and b is adopted. 2. should xinhong keep or replace its manufacturing machine