Secured bonds - is secured by a specific collateral of the company. 3. Convertible bond- or convertible note is a bond that can convert into a specified number of shares of common stock. 4. Callable bond- bonds which can be redeemed at the option of the issuing company before the bond reaches its date of maturity.
Contrast these types of bonds: (a) Secured and unsecured. Secured bonds have particular assets of the issuer promised as collateral for the bonds. An unsecured bond is given against the general credit of the borrower. (b) Convertible and callable. A convertible bond can be converted into common stock and a callable bond can be retired at a stated dollar amount prior to maturity.
Is the WACC set by investors or by managers? WACC is basically the rate of return required by a capital provider in exchange for not taking on another investment in another project with similar risk. In some ways, you can describe it as opportunity cost. WACC is the minimum return required by capital providers and managers should only invest in projects that give return in excess of WACC. WACC takes into account all capital resources such as common stock, preffered stock, bonds and any other long-term debt.
The discount yield uses the terminal price, or the security’s face value, as the base price in calculating an annualized interest rate. The bond equivalent yields are based on the purchase price of a security. Because adjusting for both the base price and days in the year difference, requires converting a discount yield into a bond equivalent yield. 4. What’s is the difference between a single-payment yield and a bond equivalent yield?
c. Within the net amount of installment accounts receivable. d. As an addition to the related installment accounts receivable. 3. Durler Company's account balances at December 31 for Accounts Receivable and the related Allowance for Doubtful Accounts are $800,000 and $13,000, respectively. From an analysis of accounts receivable, it is estimated that $28,000 of the December 31 receivables will be uncollectible.
Quiz 9 STOCKS AND THEIR VALUATION 1(9-1) Preemptive right F G Answer: a EASY [i]. The preemptive right gives current stockholders the right to purchase, on a pro rata basis, any new shares issued by the firm. This right helps protect current stockholders against both dilution of control and dilution of value. a. True b.
| | 3. | In a period of rising prices, the inventory method that produces the lowest ending inventory is the: A. | average cost method. | B. | FIFO perpetual method.
1. Why do they call these contracts derivatives? Where is the optionality in these contracts? Derivatives are financial instruments whose value is derived from the value of something else. They generally take the form of contracts under which the parties agree to payments between them based upon the value of an underlying asset or other data at a particular point in time.
Case Analysis - Acme Investment trust How is the fee structure suggested by Hicks, Muse, Tate, and Furst different from standard private equity fee structure? Standard PE fee structureGenerally Standard fee structure has two components Management fees and Carried interest.In Standard PE fee structure private equity investors receive capital gains as long as the portfolio generates certain returns i.e portfolio value exceeds 100% .Under this structure the cost basis of each investment is first returned to limited partners. The remainder of capital gain on this investment was then divided between limited and general partners on the basis of agreed upon formula. The fee structure suggested by HMFT * According to the fee structure suggested by Hicks, Muse, Tate, and Furst ,the investors are guaranteed at least 20% return. The management fees received by GP will be according to industry standards.
2. What is IPO underpricing? If you decide to try to buy shares in every IPO, will you necessarily make money from the underpricing? Underpricing refers to the fact that, on average, underwriters pick the IPO issue price so that the average first-day return is positive. If you followed a strategy of placing an order for a fixed number of shares on every IPO, your order will be completely filled when the stock price goes down, but you will be rationed when it goes up.