A public company has asked for your help. They are having a hard time dealing with earnings per share and would like your consultation. They are planning on issuing a few securities in the coming year and would like your help. Please discuss how these two issues will impact the diluted earnings per share calculation. 1) Convertible debt where a required conversion will take place ten years after the issue date 2) Debt with detachable warrants. The warrants may be exercised if profits exceed a certain threshold in the next five years ($1,000,000 is the threshold).

A public company has asked for your help. They are having a hard time dealing with earnings per share and would like your consultation. They are planning on issuing a few securities in the coming year and would like your help. Please discuss how these two issues will impact the diluted earnings per share calculation. 1) Convertible debt where a required conversion will take place ten years after the issue date 2) Debt with detachable warrants. The warrants may be exercised if profits exceed a certain threshold in the next five years ($1,000,000 is the threshold).

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter21: Dynamic Capital Structures And Corporate Valuation

Section: Chapter Questions

Problem 5MC: David Lyons, CEO of Lyons Solar Technologies, is concerned about his firms level of debt financing....

See similar textbooks

Similar questions

You work for a public company that has relied heavily ondebt financing in the past and is now considering a preferredstock issuance to reduce its debt-to-assets ratio. Debt-to-assetsis one of the key ratios in your company’s loan covenants.Should the preferred stock have a fixed annual dividend rateor a dividend that is determined yearly? In what way mightthis decision be affected by IFRS?
Upon further investigation, you hare found that the amount of account payables for Companies A and X at the start of the year is 20,000 and 30,000, respectively. Apart from that, the amount of credit purchase for Companies A and Bis 250,000 and 280,000, respectively. Based on all this information, recommend on which company that gire lower risk to your company. The recommendation must be ustified by the following analysis:. a) Liquidity analysis. b) Solvency analysis. c) Any other financial analysis that you. think can help in making your decision. Table: Balance Sheet for Company A and Company B Assets 280,000 110,000 140,000 100,000 100,000 730,000 Fixed Assets Other Non-Current Assets 250,000 80,000 120,000 80,000 120,000 650,000 Account Receivables Inventory Cash ТОTAL Liabilities Capital Long Term Debt Account Payables Other Current Liabilities ТОTAL 250,000 120,000 160,000 120,000 650,000 280,000 140,000 180,000 130,000 730,00
If iOS Corp. issues an additional $8 million of debt and uses this money to retire common stock, what will be the expected return on the stock? Assume that the change in capital structure does not affect the risk of the debt, and recall that the WACC under the initial capital structure is 13.85%. Enter your answer as a percentage. Do not include the percentage sign in your answer. Enter your answer rounded to 2 DECIMAL PLACES. TE= Number Click "Verify" to proceed to the next part of the question.
Upon further investigation, you have found that the amount of account payables for Companies A and X at the start of the lyear is 20,000 and 30,000, respectively. Apart from that, the amount of credit purchase for Companies A and B is 250,000 and 280,000, respectively. Based on all this information, recommend on which company that gire lower risk to your company. The recommendation must be ustified by the following analysis: a) hiquidity analysis. b) Solvency analysis. c) Any other financial analysis that you think can help in making your decision. Table: Balance Sheet for Company A and Company B Assets Fixed Assets Other Non-Current Assets Account Receivables Inventory Cash 250,000 80,000 120,000 80,000 120,000 650,000 280,000 110,000 140,000 100,000 100,000 ТОTAL 730,000 Liabilities Саpital Long Term Debt Account Payables Other Current Liabilities ТОTAL 250,000 120,000 160,000 120,000 650,000 280,000 140,000 180,000 130,000 730,000
What are the differences between current liability and non current liability? If you own a company what you prefer to issue ordinary shares or bonds, explain why? If you prepare the financial statements and the balance of long term loans $ 25000 and $10000 short term loans, you found there is 5000 from the long term loan mature after 3 how much will be the balance of long months. term loans and short term loan?
Which of the following has the highest interest rate? Select one: a. Corporate Bond O b. Government Bond c. Treasury Bills d. Callable Corporate Bond The ratio that is used to compare the market value between companies is Select one: a. Equity Muitiplier b. EPS c. P/E d. Profit margin You have 50,000BD which you can use to either buy cars or to deposit in a bank account for 1 year. Inflation for the year is estimated to be 7%, and the bank deposit rate is 4.5%. if you had a goal of purchasing as many cars as possible, when should you buy them? Select one: a. Now b. After a year c. After 2 years d. Not enough information to decide
For the next three questions (1-3) assume what follows: Assume that you acquired a previously issued debt instrument. According to its specifications, it promised to pay $1,000 precisely in two years from the day of its original issue. At the time it was issued, investors anticipated 8.00% in interest on instruments with similar characteristics and risk level. *Note, standard rounding rules apply to all calculations! Q1. What price did you have to pay for this security - under assumption that you acquired it in a secondary market precisely three months after its original issuing, and taking into account that at the time of your acquisition investors anticipated to earn 10.00% in interest on securities with similar features and risk characteristics? A). $857.34 B). $846.37 3000K AS
Suppose you had the following propositions of returns from two companies W and Y: Company Returns (OMR) Comments W 475 Company W proposes to give OMR 475 today Y 550 Company Y proposes to give you OMR 550 but after 2 years You also know that the Interest Rate is by 10%. Question: In which company do you choose to invest your money and why? (Use two formulas (ways) and also use Tables to make sure your answers are correct).
is it possible to get the answer to the second part of the question rather than the first. You have the following initial information on CMR Co. on which to base your calculationsand discussion for questions 1) and 2):• Current long-term and target debt-equity ratio (D:E) = 1:4• Corporate tax rate (TC) = 30%• Expected Inflation = 1.75%• Equity beta (E) = 1.6385• Debt beta (D) = 0.2055• Expected market premium (rM – rF) = 6.00%• Risk-free rate (rF) = 2.15%1) The CEO of CMR Co., for which you are CFO, has requested that you evaluate apotential investment in a new project. The proposed project requires an initial outlay of$7.15 billion. Once completed (1 year from initial outlay) it will provide a real net cashflow of $575 million in perpetuity following its completion. It has the same business riskas CMR Co.’s existing activities and will be funded using the firm’s current target D:Eratio.a) What is the nominal weighted-average cost of capital (WACC) for this project?b) As CFO, do you…
A) You invest OMR 900 in a bond which gives 9% interest over a period of 2 years, the compounding is done quarterly. How much will be the value of the investment? Select one: a. 1053.24 b. 1254.74 c. 1075.34 d. 753.24 B) Which of the statements are not correct Select one: a. Profits refers to earnings before Interest and Taxes b. Investment decisions relate to pattern of financing c. Dividend pay out ratio refers to what proportion is paid to shareholders d. Borrowed funds are relatively cheaper than shareholders’ funds
The balance sheet and income statement shown below (in the picture) for Zenzo Inc. Note that the firm has no amortization charges, it does not lease any assets, none of its debt must be retired during the next 5 years and the notes payable will be rolled over. Based on the balance sheet, find: 1. Book value per share 2. Market to book ratio 3. Equity multiplier
For the following investments, identify whether they are: 1. Debt investments at amortized cost. 2. Debt investments at fair value. 3. Trading equity investments. 4. Non-trading equity investments. Each case is independent of the other. No. Statement 1 A bond that will mature in 4 years was bought 1 month ago when the price dropped. As soon as the value increases, which is expected next month, it will be sold. 2 3 4 10% of the outstanding shares of Farm-Co was purchased. The company is planning on eventually getting a total of 30% of its outstanding shares. 6 10-year bonds were purchased this year. The bonds mature at the first of next year, and the company plans to sell the bonds if interest rates fall. Bonds that will mature in 5 years are purchased. The company has a strategy to hold them to collect the contractual cash flows on the bonds. 5 A bond that matures in 10 years was purchased. The company is investing money set aside for an expansion project planned 10 years from now.…