What is the ex-dividend price of a share in a perfect capital market? b. If the board instead decided to use the cash to do a one-time share repurchase, in a perfect capital market, what is the price of the shares once the repurchase is complete? c. In a perfect capital market, which policy in part (a) or (b) makes investors in the firm better off? Problem 17-15 on Distribution to Shareholders based on Chapter 17 Payout Policy Suppose that all capital gains are taxed at a 25% rate and that the dividend tax rate is 50%.
Once again if the president’s bonus is based off of net income, this situation is the most favorable for a high paying bonus and encourages stockpiling inventory to inflate net income. b. If the sales outlook for the coming three years were to increase to 30,000,000, the newly implemented system would prove valuable to B.E. Company. If production is kept the same, the company is predicted to sell every unit produced which would avoid a stockpile of inventory and also safeguarding an extra 5,000,000 units in ending inventory in case sales go above 30,000,000.
Week 10 Problems 1. Given the following information: Total assets $100,000 Debt (12% interest rate) $80,000 Equity $20,000 Variable costs of production $14 per unit Fixed cost of production $27,000 Units Sold 12,300 Sales price $19.75 per unit What happens to operating income and net income if output is increased by 10 percent? Verify your answer. Revenue: $19.75*(12,300) = $242,925 Expenses: $14*(12,300) = $172,200 Operating Income: $242,925-$172,200 = $70,725 Net Income: $72,725- (.12*$80,000) = $63,125 With 10% increase in revenue: Revenue: $19.75*(13,530) = $267,217.50 Expenses: $14*(13,530) = $189,420 Operating Income: $267,217.50- $189,420 =$77,797.50 Net Income: $77,797.50 - (.12*$80,000) =$38,197.50 Operating Income rose from $70,725 to $77,797.50 for a 91% increase. Net income dropped from $63,125 to $38,197.50 which cuts losses by $24,927.50.
On the day the exchange was effected, the market value of the shares was $20 (Bloomberg).If the stock price were to rise to $40 after approval or decrease to $16 when FDA disapproved, using Binomial model, with current interest rates of 5.55%, we calculated the value of each call option—$3.39(Table 1). In comparison, we used the Black-Scholes model to value these call spreads. Given their
The real wage and rental price of capital also increase by 10 percent. Question 4 (15 marks) a) Public saving equals T-G. An increase in government spending, G, reduces public saving. b) Private saving equals Y-T-C. An increase in government spending does not affect private saving. c) National saving equals Y-C-G. An increase in government spending reduces national saving by an amount equal to the increase in government spending. d) The equilibrium interest rate increases to bring desired investment into equilibrium with the reduced quantity of national saving.
ECO 372 FINAL EXAM 1. Consider if the government instituted a 10% income tax surcharge. In terms of the AS/AD model this change should have a. shifted the AD curve to the left b. shifted the AD curve to the right c. made the AD curve flatter d. made AD curve steeper 2. If the depreciation of a country’s currency increases it aggregate expenditures by 20, the AD curve will a. shift right by more than 20 b. shift right by less than 20 c. shift right by exactly 20 d. not shift at all 3. Suppose that consumer spending is expected to decrease in the near future.
What is the required journal entry as a result of this litigation? 10. Question: : (TCO D) Reich, Inc. issued bonds with a maturity amount of $200,000 and a maturity ten years from date of issue. If the bonds were issued at a discount this indicates
In order to maintain a certain return from the shares, Simmons has to charge a proper price of $50. If Simmons sold its position to Monmouth, Robertson’s cost of goods sold and other expense could be reduced. However, the other groups of Robertson shareholders still have an alternative merger if the concern of continuity of Robertson management and operating independence is taken into account. There may be a trade-off between management independence and potential profits. If the management is in favor of operating independence more, it would support
What amount of unrealized inter-company profit must be deferred by Luffman? | | Your Answer: | | | $0 | | CORRECT | | | $8,400 | | | | | $28,000 | | | | | $52,000 | | | | | $80,000 | | | | | | Points Received: | 2 of 2 | | Comments: | | 2. | Question: | (TCO 1) Which of the following results in a decrease in the Equity in Investee Income account when applying the equity method? | | Your Answer: | | | Dividends paid by the investor | | | | | Net income of the investee | | INCORRECT | | | Unrealized gain on inter-company inventory transfers for the current year | | CORRECT ANSWER | | | Unrealized gain on inter-company inventory transfers for the prior year | | | | | Extraordinary gain of the investee | | | | | | Points Received: | 0 of 2 | | Comments: | | 3. | Question: | (TCO 1) In a situation where the investor exercises significant influence over the investee, which of the following entries is not actually posted to the books of the investor?
P = F*r*[1 -(1+i)^-n]/i + C*(1+i)^-n 1000*.08 * (1 - 1.09^-12)/.09 + 1000*1.09^-12 = $928.39 5-2 Wilson Wonders’s bonds have 12 years remaining to maturity. Interest is paid annually, the bonds have a $1,000 par value, and the coupon interest rate is 10%. The bonds sell at a price of $850. What is their yield to maturity? Inputs | | Current Price: | $ | | Par Value: | $ | | Coupon Rate: | | % | Years to Maturity: | | | | Results | | Current Yield: | | % | Yield to Maturity: | | % | Yield to Maturity = 12.48% 5-6 The real risk-free rate is 3%, and inflation is expected to be 3% for the next 2 years.