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Sally Ruth, Inc. has outstanding $1,000 par value bonds with an annual coupon interest rate of 8 percent. The bonds will mature in 20 years and interest is paid semi-annually. Compute the current pr
Calculate earnings per share (EPS) under each of the three economic scenarios before any debt is issued. Also calculate the percentage changes in EPS when the economy expands or enters a recession.
What are the benefits and costs of using price data from only the previous 90 trading days? What advice would you give Cecilia about the number of data points to use?
Calculate the ex-rights price that would make a new shareholder indifferent between buying shares at the old stock price and exercising the rights or buying the shares ex-rights.
The firm has decided to repurchase 500 of those shares in the open market. What will the price per share be after the share repurchase is completed? Ignore taxes and market imperfections.
Explain the effect on the average lives of sequential-pay structures of including an accrual tranche in a CMO structure.
The exercise price on one of ORNE Corporation's call options is $35 and the price of the underlying stock is $34. The option will expire in 55 days. The option is currently selling for $0.25. Calcu
Dividends Roll Corporation currently has 220,000 shares of stock outstanding that sell for $82 per share. Assuming no market imperfections or tax effects exist, what will the share price be after:
JSPDI has outstand preferred stock. If one share's dividend is $15.0 and the required return on preferred is 13.00% versus the required return on its stock of 12.00%,and a required return on the ma
Johnson Ind. is considering an expansion project. The necessary equipment could be purchased for $9 million and the project would require an initial $3 million investment in net operating working c
What are the three types of financial management decisions? For each type of decision, give an example of a business transaction that would be relevant.
Predator Pucks, Inc. has current assets of $8,000, net fixed assets of $45,000, current liabilities of $6,800, and long-term debt of $13,900. What is the value of the shareholders' equity account fo
The firm had negligible amounts of cash and marketable securities, and it's fixed assets were $150,000. AFC's payables deferral period is 35 days. (a) Calculate AFC's cash conversion cycle. (b) Calc
Suppose the company issues 9,000 shares of new stock at the following prices: $40, $20, and $10. What is the effect of each of the alternative offering prices on the existing price per share?
Calculate the NPV (approx.) of the lease relative to an equivalent loan. Assume the cost of debt after-tax is 10%. Assume that the tax savings on the lease payment occurs at the time the payment is
Polycorp is about to lease mining equipment worth $1,500,000. The corporate tax rate is 20% and the equipment can be depreciated on a diminishing value basis of 30% over 4 years (salvage value is ze
If the economy falls into a recession, the stock's return is projected at a negative 11.6 percent. The probability of a normal economy is 80 percent while the probability of a recession is 20 percen
Argo's weighted average cost of capital is 18%. What is the NPV of undertaking this expansion project if the weighted average cost of capital is used as the discount rate?
Calculate the NAL assuming a ZERO residual value. Should ABC lease? Calculate the NAL assuming a $350,000 residual value. Should ABC lease?
The depreciation expense is $31,000. The tax rate is 34 percent. The sale price is estimated at $15.00 a unit, give or take 4 percent. What is the net income under the worst case scenario?
What is the Expected Rate of Return on Stock XYZ given the following information (Use CAPM): (a) Expected Return on the Risk Free Asset: 3%, (b) Expected Rate of Return on the Market: 9.5%, and (c)
What are the NPV and IRR of this real estate investment? Show how you arrived at your answers. Is this a good investment for the investors? Why or why not? Theoretically, what could happen if the inve
What things contribute to the riskiness or stability of the stock? Define investment risk in your discussion, and consider how it affects share price. What is the CAPM and security market line, and
Calculate Company D's weighted average cost of capital, given the following information: (a) Tax Rate: 22%, (b) Average Price of Outstanding Bonds: $1,280, (c) Coupon Rate (Debt): 7%, (d) NPER (Debt
The firm is 100 percent financed with common stock. Division A within the firm has an estimated beta of 1.08 and is the riskiest of all of the firm's operations. What is an appropriate cost of capit