Question: : (TCO D) A company issues $5,000,000, 7.8/%, 20-year bonds to yield 8% on January 1, 2010. Interest is paid on December 31. The proceeds from the bonds are $4,901,036. Using effective-interest amortization, how much interest expense will be recognized in 2010? 15.
a) PKR 3,200 b) PKR 18,000 c) PKR 30,000 d) PKR 33,200 15. Firm A has a Return on Equity (ROE) equal to 24%, while firm B has an ROE of 15% during the same year. Both firms have a total debt ratio (D/V) equal to 0.8. Firm A has an asset turnover ratio of 0.9, while firm B has an asset turnover ratio equal to 0.4. From this we know that a) Firm A has a higher profit margin than firm B b) Firm B has a higher profit margin than firm A c) Firm A and B have the same profit margin d) Firm A has a higher equity multiplier than firm B 16.
Each bond would have 75 warrants attached to it, each exercisable into one share of stock at an exercise price of $47. The firm’s straight bonds yield 10%. Each warrant is expected to have a market value of $2.00 given that the stock sells for $42. What coupon interest rate must the company set on the bonds in order to sell the bonds-with-warrants at par? Question 24 Europa Corporation is financing an ongoing construction project.
What amount should Ruiz record on March 1, 2010 as paid-in capital from stock warrants? (Points : 4) $28,800 $33,600 $41,600 $40,000 3. (TCO A) On January 1, 2010, Trent Company granted Dick Williams, an employee, an option to buy 100 shares of Trent Co. stock for $30 per share, the option exercisable for 5 years from date of grant. Using a fair value option pricing model, total compensation expense is determined to be $900. Williams exercised his option on September 1, 2010, and sold his 100 shares on December 1, 2010.
P/E Ratio Model and Future Price Walmart (WMT) recently earned a profit of $3.13 per share and has a P/E ratio of 14.22. The dividend has been growing at a 12.5 percent rate over the past few years. If this growth continues, what would be the stock price in five years if the P/E ratio remained unchanged? C. $80.20 Pn = (P/e) * E0 * (1+g)n P5 = (14.22) * 3.13 * (1+.125)5 = 80.2059 7. Expected Return The Buckle (BKE) recently paid a $0.90 dividend.
Financial Securities Cases Chapter 2: Financial Advisor’s Investment Case 1. What is the percentage return earned by Darin if he acquires 100 shares, holds the stock for a year, and sells the stock for $80? Under the following conditions percentage earned by Darin is: 33.1% 2. What is the percentage return earned by Victor if he acquires 100 shares on margin, holds the stock for a year, and sells the stock for $80? What advantage does buying stock on margin offer Victor?
FIN-516 WEEK 1 – HOMEWORK ASSIGNMENT Problem Based on Chapter 14, Residual Dividends Middlesex Plastics Manufacturing had 2011 Net Income of $15.0 Million. Its 2012 Net Income is forecast to increase by 8%. The company’s capital structure has been 35% Debt and 65% Equity since 2010, and the company plans to maintain this capital structure in 2012. The company paid $3.0 Million cash dividends in 2011. The company is planning to invest in a major capital project in 2012.
Question 23 Which of the following statements is CORRECT? Question 24 Which of the following bonds has the greatest interest rate price risk? Question 25 A 10-year bond pays an annual coupon, its YTM is 8%, and it currently trades at a premium. Which of the following statements is CORRECT? Question 26 Assume that interest rates on 20-year Treasury and corporate bonds with different ratings, all of which are noncallable, are as
The discount rate used to calculate the present value of the project is Sampa Video’s cost of equity capital. We can use the CAPM model to calculate the rate, which is (5%+1.5*7.2%). Then we get the rate of 15.8% as the discount rate used to calculate the PV of the Free Cash Flows from 2002 to 2006. The material said that after 2006 FCF would grow at 5% long term rate. We estimated the terminal value of the company using the Gordon Growth Model, which comes the result of $4,812,500.