What is the total profit or loss to the investor? Use a risk-free rate of 4% and assume this is a European option where the stock does not pay any dividends. (Points : 20) 4. On March 1, a company declared quarterly dividends of $2 per share to all common stock shareholders as of March 15. The ex-dividend date is March 19 and there are 1 million shares outstanding.
How much will she have in December of 2007? (Assume that a deposit is made in 2007. Make sure to count the years carefully.) 8. Mr. Flint retired as president of the Color Tile Company but is currently on a consulting contract for $45,000 per year for the next 10 years.
When the company resells it, the gain goes into APIC (additional paid-in capital) and the stock sold is recorded in the Treasury account. 2. Lynn Co. issued 150,000 shares of $10 par common stock for $1,800,000. Lynn acquired 6,000 shares of its own common stock at $15 per share. Three months later, Lynn sold 3,000 of these shares at $19 per share.
Reporting Intercorporate Interests (Equity vs Cost Method) 1. On January 1, 2007, Rotor Corporation acquired 30 percent of Stator Company’s Stock for $150,000. On the acquisition date, Stator reported Net assets of $450,000 valued at historical cost and %500,000 stated at fair Value. The difference was due to the increased value of buildings with a remaining life of 15 years. During 2007 and 2008 Stator reported Net Income of $25,000 and $15,000 and paid dividends $10,000 and $12,000, respectively.
CHAPTER TWO PROBLEMS 1. Last year Rattner Robotics had $5 million in operating income (EBIT). The company had net depreciation expense of $1 million and an interest expense of $1 million; its corporate tax rate was 40 percent. The company has $14 million in current assets and $4 million in non-interest-bearing current liabilities; it has $15 million in net plant and equipment. It estimates that it has an after-tax cost of capital of 10 percent.
They were given a 10% discount by the manufacturer. They paid $400 for shipping and sales tax of $3,000. Stine estimates that the machinery will have a useful life of 10 years and a residual value of $20,000. If Stine uses straight-line depreciation, annual depreciation will be • $3,760. • $4,072.
WE PROVIDE CASE STUDY ANSWERS, ASSIGNMENT SOLUTIONS, PROJECT REPORTS AND THESIS firstname.lastname@example.org ARAVIND - 09901366442 – 09902787224 CORPORATE FINANCE CASE STUDY : 1 Reliance company has a $ 1,000 face value convertible bond issue that is currently selling in the market for $ 950. Each bond is exchangeable at any time for 25 shares of the company’s stock. The convertible bond has a 7 percent coupon. Payable semi-annually. Similar non-convertible bonds are priced to yield 10 percent.
80*7.1607+1000*.3555 = $928 • 5-2 Yield to Maturity for Annual payments 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? 100+1000-850/12/1000+850/2 = 112.5/925 = .1216 or 12.16% • 5-6 Maturity Risk Premium The real risk-free rate is 3%, and inflation is expected to be 3% for the next 2 years.
Text Problem Sets and Concept and Principles Summary FIN 571 Text Problem Sets and Concept and Principles Summary Problem A3: (Bond valuation) General Electric made a coupon payment yesterday on its 6.75% bonds that mature in 8.5 years. If the required return on these bonds is 8% APR, what should be the market price of these bonds? PMT -33.75 FV -1000 N 17 Rate 4% Market Price $923.96 Fair Value of a bond = C/r*(1-1/(1+r)^n)+M/(1+r)^n Assuming that it’s a semi-annual bond with face value of $1000 A13. (Required return for a preferred stock) Sony $4.50 preferred is selling for $65.50. The preferred dividend is non-growing.
Estimate the two- and three-year LIBOR zero rates. 2. A financial institution has agreed to pay 10% per annum (with quarterly compounding) and to receive 3-month LIBOR in return on a notional principal of $100 million with payments being exchanged every 3 months. The Swap has a remaining life of 5 months. The 2-month and 5-month zero rates are 9.9% and 10.2% with continuous compounding, respectively.