Case Study: Cost Science, Inc.

Choosing two profitable stocks amongst a myriad of potential alternatives is a daunting task to say the least. In order to narrow my choices from thousands to two, I examined several aspects of companies I was interested in. Among these were, company overview, alpha and beta ratings, price ratios, price charts, and company headlines. After evaluating this information, I chose Intuit INC (INTU) listed on the NASDAQ and Johnson and Johnson (JNJ) listed on the NYSE.

A bond with an annual coupon of $70 and originally sold at par for $1,000. The current market interest rate (yield to maturity) is 8%. This bond will sell at _______. Assuming no change in market interest rates, the bond will present the holder with capital ________ as it matures.

1.What are conversion factors? Why were conversion factors developed? How do they impact on which bond is cheapest to deliver? Under what conditions would there be no cheapest to deliver? Explain in detail.

The stock market has always intrigued me and I have since been eager to learn more about it. Starting back in January of this year, I ordered three textbooks on stock trading to become more informed on the subject. After reading these books, I gained further insight on stock trading which led me to open my own brokerage account where I could buy and sell stocks. I started by playing a stock simulation which was very similar in concept to StockTrak, a program we used in this class. I found that this helped provide me with a hands on experience which helped familiarize me with stock trading and learning how to manage and use my money efficiently. I continued to play this simulation for about two months and during this time my portfolio grew about 4%, which provided me a confidence boost and motivated me to invest in my real money into the stock market. In March of 2015, I officially began trading in the stock market and I continued to learn along the way. As of now, I have roughly nine months of stock trading experience. As stated previously, I have always had in interest in the stock market, but I never acted upon it until as recently as earlier this year. My interest in the stock market was peaked because I enjoy taking risks and the stock market

* b.Assume the firm’s stock now sells for $20 per share. The company wants to sell some 20-year, $1,000 par value bonds with interest paid annually. Each bond will have attached 50 warrants, each exercisable into 1 share of stock at an exercise price of $25. The firm’s straight bonds yield 12%. Assume that each warrant will have a market value of $3 when the stock sells at $20. What coupon interest rate, and dollar coupon, must the company set on the bonds with warrants if they are to clear the market? (Hint: The convertible bond should have an initial price of $1,000.)

What annual interest rate is needed to produce $200,000 after five years if only $100,000 is invested?

D* = 3.59/1.053 = 3.41 years Learning Objective: 11-02 Compute the duration of bonds; and use duration to measure interest rate sensitivity.

a. What would Mrs. Beach have to deposit if she were to use high quality corporate bonds an earned an average rate of return of 7%.

- The Bet-r-Bilt Company has a 5-year bond outstanding with a 4.30 percent coupon. Interest payments are paid semi-annually. The face amount of the bond is $1,000. This bond is currently selling for 93 percent of its face value. What is the company's pre-tax cost of debt?

Life insurance is meant to provide funds to replace a breadwinner's to protect and support dependents. Chad and Haley are dependents, not income providers. Therefore, the purchase of life insurance is unnecessary and not recommended. The Dumonts should use the money they would spend on policies for the children to increase their own coverage.

1. In the last five years the growth in sales for the company has been around 10% per annum, except for the 1997, the growth was 18.78%. In the case, nothing is mentioned that company has made any drastic changes in its strategy to grow faster. In such a scenario, projected a consistent growth of 20% per annum for the next 5 years is too optimistic.

b. What is Q’s stock worth per share? How does that value depend on the payout ratio and growth rate after year 4?

* We assume a risk-free rate of 5.09%. This number comes from the current yield of the 30 year T-bond as shown in Exhibit 5.

However, the company expects that its sales will grow 25 percent annually for the next five years. As illustrated in Table 1 the demand after 5 years will be approx.

Founders’ termination term is very important for Laracey because it increases the possibility that the unvested equity of the founders could be accelerated when the incoming CEO terminates them. It directly protects the benefits of the founders.