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Assuming another company owns 25 percent of the common stock of Usry and has voting control, what is the percent of the total assets controlled by the other firm's equity?
Suppose that the plant can be sold for $90 million to another automaker if the line is not successful. Now would you build the plant? Illustrate this option to abandon using a decision tree.
Johns' post merger beta is estimated to be 1.5, the risk-free rate is 6 percent, and the market risk premium is 4 percent. Calculate the value of Johns' Burger to Burger Queen.
How many shares must Shim issue in the acquisition? Assuming the net income of each firm remains the same, what is the earnings per share after the acquisition?
What is the earnings per share of the merged company based on the original shares of each company? What is the earnings per share of Paula?
For each case, determine (a) the exchange ratio in shares, and (b) the exchange ratio in market price.
What will earnings per share be subsequent to the merger? What is the change in earnings per share for the stockholders of companies A and B?
Due to merger negotiations, company R offers $50 a share. The acquisition is done through an exchange of securities. What is the ratio of exchange?
It is anticipated that the after-tax cash inflows from the new equipment will be $30,000 a year for the next 8 years. The cost of capital is 12 percent. What is the initial net cash outlay?
Acquisition of Assets for Cash. Knab Corporation is considering acquiring Deerson Corporation for $40,000. What is the net cost of the machinery?
You can buy XZ Company stock at $30 a share, or $3,000 for 100 shares. If the YZ Company stock goes to $16, what is the option worth.
The conversion ratio is 15. The market price of the stock is $130. The call price is $1,800. Would the bondholder rather convert to common stock or receive the call price?
Discuss four characteristics of the convertible debenture, and (b) explain whether you consider the convertible debenture or the common stock more attractive for purchase. (CFA, adapted.)
What is the approximate market price of common stock if the conversion value of the bond is 20 percent higher than the call price?
Conversion Value. A $1,000 bond is convertible into 25 shares of common stock having a market value of $47 per share. What is the conversion value?
For example, can you think of some industries in which this technique would be particularly attractive? Would it be more useful for large-scale investments than small ones? Discuss.
(a) What is the conversion ratio? (b) What is the conversion value? (c) Assuming the stock price is anticipated to grow at 8 percent annually, what is the conversion value at the end of the first
Convertibility. Tristar Corporation issued a $1,000 bond at par. The common stock has a market price of $45. What is the conversion value of the bond?
You have inherited 250 acres of prime Iowa farmland. There is an active market in land of this type, and similar properties are selling for $1,000 per acre. Net cash returns per acre are $75 per yea
The conversion price is $25. (a) What is the conversion ratio? (b) What is the conversion value? (c) What is the percentage conversion premium?
A $1,000 convertible bond permits the holder to convert the bond into five shares of common stock (a) What is the conversion ratio? (b) What is the conversion price?
The conversion price of common stock is $20 a share. Into how many shares will a $1,000 convertible bond be converted?
A warrant for Ace Corporation stock enables the holder to purchase one share of common stock at $30 a share. The stock has a market price of $47 a share. What is the value of the warrant?
Premium. The market price of Harris Corporation stock is $45. Its exercise price is similarly $45. Will the stock warrant sell at a premium?
Assume the same facts as Problem 16.1, except that the stock has a market price of $28 a share. What is the value of the warrant?