Financial Management Chapter 8 K

(a) Give the algebraic expression for profit. Be sure to define your variables. (5 points)

1) Describe the basic features that distinguish the four basic forms of business ownership sole proprietorships, general partnerships, C corporations, and limited liability companies.

Common stockholders are the basic owners of a corporation, but few stockholders of large corporations take an active role in management. Instead, they elect the corporation’s board of directors to represent their interests. Board members seldom get involved in the day-to-day management of the company. They establish the basic mission and goals of the corporation and appoint

D0 = (dividend yield) × (value of the index) = 0.0615 × $865 = $53.20 . (21)

Indexi = 0.053 - 0.095 Fi + 0.020 PHDi + 0.007 FPHDi + 0.0015 TENi

Owners: The owner(s) are those who will have “full rights to manage every aspect of the organization” (Hubstaff Support 2014)

2) Calculate following values recursively. ae + bg, af + bh, ce + dg and cf + dh.

Answer: D DM 13.00 + DL 55.00 + V OH 1.00 + F OH 15.00 = 84.00

Dividends were assumed to grow at the geometric average of the last 6 years, 20.28%. P0 = D2 Dn Pn D1 + + ··· + + 1 2 n (1 + Ke ) (1 + Ke ) (1 + Ke ) (1 + Ke )n $1.58 $2.28 $87.31 $1.31 + + ··· + + = 1 2 4 (1 + 7.0%) (1 + 7.0%) (1 + 7.0%) (1 + 7.0%)4 = $72.53

2. The shareholders are one of the

| Activity DPV = 4/6 X $500,000 = $333,333EV = 55% X $500,000 = $275,000AC = $350,000

Corporate Finance ADM 3350 M & P (Winter 2015) Assignment 1 Due Date: February 23, 2015 Question 1 (5 Marks) Varta Inc. has just issued a dividend of $1.50 per share on its common stock. The company paid dividends of $1.10, $1.15, $1.25, and $1.37 per share in the last four years. The stock currently sells for $48. a. What is your best estimate of the company's cost of equity capital using the arithmetic average growth rate in dividends? b. What if you use the geometric average growth rate? Solution: (3 + 2 = 5 Marks)

b) the nature of takeover (it can be considered as “Insider Trading”, and to avoid litigation by shareholders, an acquirer may need to pay premium)

⎟ ⎜ D + E × rE ⎟ = ⎜ 40 + 300 × 0.05 ⎟ + ⎜ 40 + 300 × 0.10 ⎟

Shareholders holding minority interests in closely-held corporations are at risk of unfair or oppressive treatment8 by the majority or controlling shareholders, to an extent well beyond that of their counterparts in partnerships or in corporations whose shares are publicly traded.