I would make an investment in the company’s 5% convertible bonds. Sepracor’s ROA and ROE is above the average and showing that it is profitable; however, the company’s debt to asset ratio is above 1, which means that most of its assets are financed through debt instead of equity. Sepracor would be in trouble if its creditors were to start demanding repayment. C.) To make valid comparisons between Sepracor and Bayer, you would have to compare the rules for fair value under the U.S GAAP and iGAAP. Under IFRS, convertible bonds are separately recorded as liabilities and stockholder’s equities.
When there is an x for y stock split then you should calculate returns as r_t=(〖x/y P〗_t-P_(t-1)+〖x/y D〗_t)/P_(t-1) For example, in the case of a 5 for 4 stock split x/y=1.25. 2. You do not have data on debt returns for the comparable companies. A common rule of thumb that is used in practice is to assume that the debt of these companies is risk free (has a beta of zero). This is a good assumption when debt represents a fairly small fraction of the firm’s value.
This implies there is significant intrinsic value when combined with MidAmerican, the new customer base and economies of scale being the 2 most important factors. As a whole, Berkshire Hathaway has been astoundingly successful since 1965, overall comfortably beating the market, only being beaten in years where there is significant S&P 500 gains and suffering less of a loss of value during bad years. The MidAmerican investment has not been as
Using product offered by Continental Bank would require a higher cost for J&L, and illiquid compared with NYMEX. However, they won’t need to post a margin at the beginning of the contract. The use of a monthly average price a net would be an advantage to J&L. 3. Using the estimate of 4.5 million gallons per month, how would you construct a futures hedge for the next 12 months?
This action will help the company down the road as fewer liabilities will result in less cash outflow, and place the company in a position to manage through the construction downturn. Another upside in the balance sheet was that The Home Depot has reported a $63 million dollar increase in stock holder´s equity. This information will be used by potential lenders or investors to determine if this company is worth the investment. In this case, it appears that The Home Depot would be a good credit risk, based on the latest
SciTronics had $ 75,000 of owners’ equity and earned $ 14,000 after taxes in 2008. Its return on equity was 18.67% an improvement from the 8.2% earned in 2005. Activity Ratios: How well does the company employ its assets? 1. Total asset turnover for SciTronics in 2008 can be calculated by dividing $ 244,000 into $ 159,000.
2-How does this value affect the choice of securities in which to invest? Ans. This valuation shows that the cost of the equity is more than that of the cost of the debt. The H partners should finance the six flags through debt rather than that of the equity. The plan assigned 95% of the Company’s equity to SFO bondholders and 5% to SFI bondholders.
If the cash is higher than the net income, the company’s net income is of high quality. If the cash is lower than the net income, the company’s net income is not turning into cash and a red flag should go up. Having more cash than the net income can mean shareholders will receive an increase in dividends can reduce debt, buy back stocks, or purchase another company. According to, the cash flow statement Home Depot, Incorporated is similar to fiscal year 2007. In fiscal year 2008, Home Depot Incorporated generated $5.5 billion of cash flow from operations and used $2.0 billion to repay short-term debt and other obligations plus $1.8 billion for capital expenditures and $1.5 billion in dividends.
For the year 2007 the ratio was less than 1 meaning it needed to liquidated it marketing securities in that year, to pay bills. In year 2008, the ratio increased over one and hence there was not a need to liquidate its securities. * Acc receivable turnover ratio = Net credit Sales/ Average accounts receivable Acc receivable turnover 2008 = $875,250/ (($84,120+$128,420)/2) =8.24 times Average collection period = 360days/ 8.24 = 44 days We would need to know the credit policy of the company to determine if this collection period is reasonable. * Inventory turnover = Cost of goods sold/ Average inventory Inventory turnover 2008 = $542,750/ (($96,780+$135,850) = 4.67
Option two is the choice because the $2,716 savings difference in total interest from option two outweighs the $1,043 in interest savings from option one. Here the simulator reveals that loan option one is the correct choice. Loan option one is the best choice to solve the working capital shortfall because even though it has a higher interest rate, there is no prepayment limitation and has a total interest payment of only $32,603 after three months. The Financial Dictionary explains that “prepayment is good for the borrower because it relieves him/her of the debt, but it deprives the lender of interest he/she would have received otherwise” (Financial Dictionary, p. 1,