Secured bonds - is secured by a specific collateral of the company. 3. Convertible bond- or convertible note is a bond that can convert into a specified number of shares of common stock. 4. Callable bond- bonds which can be redeemed at the option of the issuing company before the bond reaches its date of maturity.
FIN331 Fall 2010 Extra Credit Dr. Rhee 1. Which one (s) is (are) an external financing and has the flotation cost? a. Retained earnings b. Bonds c. Preferred stock d. a & b e. b & c Answer: e Retained earnings are internal source of fund.
Which yield is used for Treasury bill quotes? a. The bond equivalent yield is the rate used to calculate the present value of and investment, and a discount yield is the return on securities results from the purchase of the security at a discount from its face value and the receipt of face value at maturity. b. They use bond equivalent yields.
Case Study 2 – Internal Control Report to the LJB Company Under the Sarbanes-Oxley Act (SOX), all publically traded United States corporations are required to maintain an adequate system of internal controls. Under this law, executives must ensure these controls are reliable and effective. An effective control system provides reasonable, but not absolute assurance for the safeguarding of assets, the reliability of financial information, and the compliance with laws and regulations. The content of this report is based on the methods and measures adopted within an organization to safeguard its assets, enhance the reliability of its accounting records, increase efficiency of operations, and ensure compliance with laws and regulations. Clarke Cummings, Keller Graduate School of Management 5/31/2012 Case Study 2 – Internal Control Report to the LJB Company Under the Sarbanes-Oxley Act, all public traded United States corporations are required to maintain an adequate system of internal controls.
Contrast these types of bonds: (a) Secured and unsecured. Secured bonds have particular assets of the issuer promised as collateral for the bonds. An unsecured bond is given against the general credit of the borrower. (b) Convertible and callable. A convertible bond can be converted into common stock and a callable bond can be retired at a stated dollar amount prior to maturity.
| b. | Commercial paper issued to finance inventory. | c. | Current maturities of long term debt. | d. | Accounts receivable generated by sales on credit. | e. | Inventory purchased with cash.
Under presentation content area the items that are found are Presentation of Financial Statements, Balance Sheet, Statement of Shareholder Equity, Comprehensive Income, Income Statement, Statement of Cash Flows, Notes to financial statements, accounting changes and error corrections, changing prices, earnings per share, interim reporting, limited liability entities, personal financial statements, risks and uncertainties, and segment reporting. Under the assets content area the items that are found are cash and cash equivalents, Receivables, Investments-debt and equity securities, Investments- equity method and joint ventures, Investments-other, Inventory, other assets and deferred costs, intangibles-goodwill and other, and
2. Describe the two offers that are presented to Metapath. Which would you choose? Why? RHC made an offer to Metapath for shares of redeemable preferred stock.
The Weighted Average Cost of Capital is the average of the costs of a company's sources of financing-debt and equity, each of which is weighted by its respective use in the given situation. By taking a weighted average, it shows how much interest the company has to pay for every marginal dollar it finances. A firm's WACC is the overall required return on the firm as a whole and, it is often used internally by company directors to determine the economic feasibility of expansionary opportunities and mergers. Also, WACC is the appropriate discount rate to use in stock valuation. No, I don’t agree with Cohen’s WACC calculation.
Suggested Questions for Warren Buffett’s Case Assignment 1. What is the possible meaning of the changes in stock price for Berkshire Hathaway and Scottish Power plc on the day of the acquisition announcement? Specifically, what does the $2.17-billion gain in Berkshire’s market value of equity imply about the intrinsic value of PacifiCorp? 2. Based on the multiples for comparable regulated utilities, what is the range of possible values for PacifiCorp?