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.
Price = $1,000 x 0.4632 + $1,000 x 6% x 6.7101 Price = $463.20 + $402.61 Price = $865.81 b. What would be the price if comparable debt yields 8 percent and the bond matures after five years? Price = $1,000 x 0.6806 + $1,000 x 6% x 3.9927 Price = $680.60 + $239.56 Price = $920.16 c. Why are the prices different in a and b? The price is different in a and b because a has longer period. d. What are the current yields and the yields to maturity in a and b?
The banks require USG to lock in fixed rates for four years for 75% of the principal. There were also some operating restructuring, including discontinuation of products and distribution channels that failed to meet requirements, layoffs and early retirements. Meanwhile, Desert Partners attempted to acquire USG that they indicated a willingness to increase their bid to $50.00 or more per share in cash for 72% of the shares. Shareholders had to decide whether to wait and vote for the proposed restructuring or tender their shares to Desert Partners. Our recommendation is to reject Desert Partner’s tender offer, and to implement the leveraged recapitalization.
The compensation expense for 2011 will be (Round off turnover calculations to three decimal places and answer to the nearest dollar.) ** $77,468 | $80,022 | $82,575 | $160,043 | 4. On January 1, 2010, Wilson Corporation granted Emelia Walker, its president, a compensatory stock option plan to purchase 8,000 shares of Wilson's $10 par common stock. The option price is $25 per share and the option has a fair value of $7 per option, which is exercisable on January 1, 2014, after four years of service. How much compensation expense should Wilson recognize on December 31, 2010?
Beckham Corporation has semiannual bonds outstanding with 13 years to maturity and are currently priced at $746.16. If the bonds have a coupon rate of 8.5 percent, then what is the after-tax cost of debt for Beckham if its marginal tax rate is 35%? Assume that your calculation is made as on Wall Street. 8. RadicalVenOil, Inc., has a cost of equity capital equal to 22.8 percent.
The firm is currently having problems cost effectively meeting run length requirements as well as meeting quality standards. The general manager has proposed the purchase of one of two large six-color presses designed for long, high-quality runs. The purchase of a new press would enable LI to reduce its cost of labor and therefore the price to the client, putting the firm in a more competitive position. The key financial characteristics of the old press and the two new presses are summarized in what follows. Old press – Originally purchased 3 years ago at an installed cost of $400,000, it is being depreciated under MACRS using a 5-year recovery period.
Problem: P22-6, Accounting Change and Error Analysis Course: AC557 Intermediate Accounting III "On December 31, 2010, before the books were closed, the management and accountants of Madrasa Inc. made the following determinations about three depreciable assets." 1. Depreciable asset A was purchased January 2, 2007. It originally cost $540,000 and, for depreciation purposes, the straight-line method was originally chosen. The asset was originally expected to be useful for 10 years and have a zero salvage value.
(TCO A) On March 1, 2010, Ruiz Corporation issued $800,000 of 8% nonconvertible bonds at 104, which are due on February 28, 2030. In addition, each $1,000 bond was issued with 25 detachable stock warrants, each of which entitled the bondholder to purchase for $50 one share of Ruiz common stock, par value $25. The bonds without the warrants would normally sell at 95. On March 1, 2010, the fair market value of Ruiz's common stock was $40 per share and the fair market value of the warrants was $2.00. What amount should Ruiz record on March 1, 2010 as paid-in capital from stock warrants?
FISH & CHIPS, INC., PART I LEASE ANALYSIS Martha Millon, financial manager for Fish & Chips Inc., has been asked to perform a leaseversus- buy analysis on a new computer system. The computer costs $1,200,000; and if it is purchased, Fish & Chips could obtain a term loan for the full amount at a 10% cost. The loan would be amortized over the 4-year life of the computer, with payments made at the end of each year. The computer is classified as special purpose; hence, it falls into the MACRS 3-year class. The applicable MACRS rates are 33%, 45%, 15%, and 7%.
| 0.1525 | c. | 6.68% | Question 3 The life expectancy of Timely brand watches is normally distributed with a mean of four years and a standard deviation of eight months. a. | What is the probability that a randomly selected watch will be in working condition for more than five years? | b. | The company has a three-year warranty period on their watches.