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Scholes warrant is trading for $10. The warrant carries the option to purchase a half share of common stock for $40. What is the speculative premium if the stock price is $50?
Explain what is meant by business risk and financial risk. Suppose firm A has greater business risk than Firm B. Is it true that Firm A also has a higher cost of equity capital? Explain.
W.C. Cycling had $55,000 in cash at year-end 2004 and $25,000 in cash at year-end 2005. Cash flow from long-term investing activities totaled -$250,000, and cash flow from financing activities total
"An exchange rate forecasting model that is not very accurate and explains only a small percentage of exchange rate changes (R2 = 5-10%) may still be a very valuable tool for certain hedging or spec
Expected Return, Dividends, and Taxes The Gecko Company and the Gordon Company are two firms whose business risk is the same but that have different dividend policies.
A company's perpetual preferred stock currently trades at $87.50 per share, and it pays an $8.00 annual dividend. If the company were to sell a new preferred issue, it would incur a flotation cost o
The company needs a computer system for 6 years, after which the current owners plan to retire and liquidate the firm. The company's cost of capital is 11%. What is the NPV (on a 6-year extended bas
Explain how the appreciation of the Australian dollar against the U.S. dollar would affect the return to a U.S. firm that invested in an Australian money market.
Bring out the difference between Funds Flow Statement and Cash Flow Statement. Mention up to what point in time they are similar and from where the differences begin.
What are the NAL and IRR of the lease? Assume now that the bank lean would cost 15 percent, but all other facts remain the same. What are the new NAL and IRR?
Maxwell Corp. is coming to the market with a new offering of 300,000 shares of stock. The firm currently has 1 million shares outstanding and total earnings of $6 million. What is the amount of dilu
When issued, the preferred stock was sold at par value such that Ideal raised $2.5 million to fund expansion of its operations. What is the annual dividend per share on the preferred stock?
The firm announced that the dividend will increase next year by 5 percent and will stay at the level for three years, after which time the dividends will increase by 4 percent annually. The required
What is the internal growth rate for a firm with an ROE of 20%, a dividend payout ratio of 60%, and an equity-debt ratio of 60%?
What is the discount yield, bond equivalent yield and effective annual return on a $1 million Treasury bill that currently sells at 97 3/8 percent of its face walue in 65 days from maturity.
Liquidity ratios: Flying Penguins Corp. has total current assets of $11,845,175, current liabilities of $5,311,020, and a quick ratio of 0.89. What is its level of inventory?
Temple Manufacturing has three divisions. Division A has been in existence the longest and has the most stable sales. Division B has been in existence for ten years and is slightly less risky than t
Identify the beta listed for a food service (restaurant) company called P.F. Chang's Bistro, stock symbol PFCB. According to Yahoo! Finance, what is PFCB's beta?
Sander's Supplies has paid a constant dividend of $2.15 a share for the past 20 years. Yesterday, the firm announced that the dividend will increase next year by 5 percent and will stay at the level
Explain the relevance of DRG analysis as tool that drives cost and affects management decisons in healthcare.
Scorch & Burn Fire Extinguishers, Inc. had an operating income (EBIT) of $260,00 last year. The firm had $18,000 in depreciation expenses, $15,000 in interest expenses and $60,000 in selling, ge
A US based multinational company has two subsidiaries, one in Mexico and one in Japan. Forecasts of business operations indicate the following short-term financing position for each subsidiary
The company has $200 million of long-term debt plus preferred stock, and it has 50 million shares of common stock outstanding. What is Petry's estimated intrinsic value per share of common stock?
Clinton company is financed 40 percent by equity and 60 percent by debt if the firm expects toeard 20 million in net income and retain 40 percent pf it, how large can the capital budget be before co
Determine the effective price at which you purchased your sugar. How do you account for the difference in amounts for the spot and hedge positions? Describe the nature of the basis risk in the long