In the above example, suppose the firm had paid $80 per share when buying back shares with its $100 in cash. (Assume that the firm can buy back fractional shares.) In this and the following two questions, fill in the blanks in the table below. Cash Other assets Total market value of D stock Shares Share price Do not use $ sign. Answer to nearest whole number. The missing value for a is: Before buyback $100 $400 $500 10 $50 After buyback 0 $400 a b C
Q: Eaton Tool Company has fixed costs of $435,600, sells its units for $94, and has variable costs of…
A: Fixed cost = fc = $435,600 Sells per unit = s = $94 Variable cost per unit = vc = $50
Q: A $2 million jumbo CD is paying a quoted 3.55% interest rate on 180-day maturity CDs. How much money…
A: A Certificate of Deposit (CD) is a type of financial instrument that enables people to deposit money…
Q: A stock will pay a dividend of $3.5 and is expected to sell for $87.8 in one year. If the current…
A: A stock's return is the change in its price over a period of time, plus any dividends or other…
Q: K Locust Inc. owes $15,000.00 to be repaid by monthly payments of $510.00. Interest is 6% compounded…
A: Since you have posted a question with multiple sub-parts , we will solve first three sub-parts for…
Q: It is estimated that the free cash flows to equity (FCFE) from 2023 will be as 2023 2,800 TL 2024…
A: Present Value is that value which is depend upon the future cash inflow & outflow from the…
Q: (Use beginning mode.) Person A invests $100/month 9% interest for 30 years. Person B invests…
A: The concept that indicates that any sum is worth more currently as compared to what it will be in…
Q: Your friend told you about a stock that they think will sell for $154 in one year. They do not pay…
A: The expected return on investment refers to the rate of profit or loss that an investor realizes…
Q: Use online resources to determine other reasons that OAO Gazprom stock was suffering at the time. In…
A: Aside from the issues with disclosure quality in 2009, there were a number of other causes why OAO…
Q: The following table shows the average life expectancies in several countries. Assume that all…
A: Insurance premium refers to the periodic sum extended by the insured to the insurer. This is the…
Q: A stock just paid a dividend of $1.5 and the dividend is expected to grow at a constant rate of 3%…
A: Current dividend = d0 = $1.5 Growth rate = g = 3% Rate of return = r = 13%
Q: In your internship with Lewis, Lee, & Taylor Inc. you have been asked to forecast the firm's…
A: Additional funds needed refers to a concept of finance that is used for achieving the motive of…
Q: Q1) Explain the capital asset pricing model (CAPM) and its relationship to the security market line…
A: CAPM is Capital Asset Pricing Model which describes the relationship between expected return and…
Q: Suppose that Gyp Sum Industries currently has the balance sheet shown below, and that sales for the…
A: Additional funds refer to the amount that is required to be generated by the company to finance its…
Q: What is the expected after-tax cash flow from selling a piece of equipment if XYZ purchases the…
A: Deprecation is that amount which is incurred due to wear & tear and usage of the assets It is…
Q: 1550 0.072 0.018
A: that can earn $1550 per quarter. @ 7.2% compounded quarterly. so quarter interest = 7.2%/2 = 1.8% =…
Q: What is the total return for each bond in each year? Round your answers to two decimal places.…
A: A bond is an instrument used by firms to raise debt capital from the market instead of traditional…
Q: Vhen a bank grants a consumer loan to someone, it leads to: O a. an indirect flow of funds Ob. Oc a…
A: Consumer loans are a type of loan offered by banks and other financial institutions to individuals…
Q: WRITE and submit a prepare on your perspective to the statements: “The primary role of management…
A: This statement reflects the shareholder wealth maximization (SWM) concept, which asserts that the…
Q: These three put options are all written on the same stock. One has a delta of −0.4, one a delta of…
A: Delta of options: Delta can be described as a ratio that measures the change in underlying asset's…
Q: Suppose you have been hired as a financial consultant to Defense Electronics, Incorporated (DEI), a…
A: Weighted Average Cost of Capital (WACC) is to be determined. Here, the cost of each component and…
Q: Your company has been doing well, reaching $1.06 million in earnings, and is considering launching a…
A: Net Present Value is also known as NPV. It is a capital budgeting techniques which help in decision…
Q: You find the following Treasury bond quotes. To calculate the number of years until maturity, assume…
A: A bond indicates a debt instrument that allows the issuer to raise funds and also obligates him to…
Q: Find the present value PV of the annuity account necessary to fund the withdrawal given. (Assume…
A: A series of periodic payments made at each regular interval is recognized as an annuity. The current…
Q: 4(B) investigate and compare investment options, including stocks, bonds, annuities, certificates of…
A: Depending on their goals, risk tolerance, and time horizon, investment options such as stocks,…
Q: a. Compute the net present value of each project. b. If the company accepts all positive net present…
A: Net present value is the difference between the present value of cash flow and initial investment…
Q: Avril will pay a dividend of $2 per share starting from year 6 and the growth rate is 10%, assume no…
A: When the company receives profits and distributes them among the shareholders. That share of profit…
Q: What is the expected current yield for each bond in each year? Round your answers to two decimal…
A: A bond is a kind of debt security issued by the government and private companies for raising funds…
Q: Select the term that corresponds to each of the given descriptions. (Note: There is only one poss…
A: The words given on the right are often used words and terminologies in finance. We have to match the…
Q: a $145,000 home. You found a bank that offers a 30-year loan at 3.5% APR. What will be your monthly…
A: A mortgage is a loan used to purchase a property or real estate. The property serves as collateral…
Q: Acme Manufacturing is considering a project that requires an investment in new equipment of…
A: The net cash flows that an entity generates after adjustment for the working capital or funding…
Q: You have $3,500 on a credit card that charges a 21% interest rate. If you want to pay off the credit…
A: A credit card is a payment card that allows the cardholder to borrow funds from a financial…
Q: Sales Forecast using Weighted Moving Average 1. Given the following, determine the expected sales on…
A: The weighted moving average is a methodology that weights the preceding values in accordance with…
Q: Belta manufacturers in China produce car engines. They have been in the business for almost 20…
A: The Altman Z-score is a financial metric that is used to assess the financial health and…
Q: Project L requires an initial outlay at t = 0 of $52,799, its expected cash inflows are $9,000 per…
A: IRR stands for "Internal Rate of Return". It is a financial metric used to evaluate the…
Q: C. D. Rom has just given an insurance company $39,500. In return, he will receive an annuity of…
A: Present Value (PV) = $39,500.00 Payment (PMT) = $5,200.00 No. of years (Nper) = 20 Future Value…
Q: A bond with a face value of 1000 and a redemption value of 1080 has an annual coupon rate of 8%…
A: Formula for price of bond is : Price of bond = Interest × [(1+r)n - 1(1+r)n × r] + Redemption…
Q: Would it be possible to show this in excel?
A: A portfolio consists of two or more stocks. The return of the portfolio and the standard deviation…
Q: obotics stock has a volatility of 27% and a current stock price of $64 per share. Roslin pays no…
A: Information Provided: Volatility = 27% Stock price (S) = $64 Risk free rate (r) = 4% Time to expiry…
Q: Find the amount in an account after 16 monthly payments of R122 have been made if R252 was withdrawn…
A: The concept of money's time value indicates that any sum is worth more currently than the same…
Q: An investor is trying to decide between a muni paying 5.75% or an equivalent taxable corporate…
A: Municipal bond yield = 5.75% Corporate bond yield = 8.25% The formula to be used is…
Q: The Wongs purchased a condominium selling for $95,000 and took out a 25-year mortgage in the amount…
A: A house is purchased through down payment and mortgage. Details of the mortgage are known. Several…
Q: The following questions are based on the series of the following cash flows. You plan to sell the…
A: The quantum and timing of cash flows emanating from the purchase, hold and sale transaction of a…
Q: Policy $168 132 1,290 1.5%
A: To calculate the NPV of switching to the proposed credit policy, we need to compare the present…
Q: Hello, i'm not a finance major but I need to report on the financial status of Home Depot for a…
A: Ratio analysis is a financial analysis technique that involves the use of various financial ratios…
Q: A loan of $3137 borrowed today is to be repaid in three equal installments due in one-and-a-half…
A: Investment is an excellent way to build wealth over the long term. By investing in assets like…
Q: Suppose that a small candy store makes Valentine's Day gift boxes that cost $14.00 and sell for…
A: An excel based financial model has to be designed for simulation. Parameters have been defined.…
Q: Consider the following information for a period of years: Long-term government bonds Long-term…
A: Average of Long term government bonds = 7.8% Average of Long term corporate bonds = 7.9% Inflation =…
Q: US T-Bill Rate % Country USA Canada UK France Italy Spain Russia South Africa Egypt Japan Singapore…
A: The average returns, standard deviation of returns and correlation of returns with US index for…
Q: 2. Find the payment needed to pay the following loans. a) $12 500 at 8% compounded quarterly for 15…
A: Any sum borrowed to meet the specific business or personal requirement is regarded as a loan. The…
Q: yer, the CEO of the Sawyer Group, is initiating planning for the company's operations next year, and…
A: Companies always wants to increase the sales and hence increase profits but that require investment…
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 2 images
- Suppose IWT has decided to distribute $50 million, which it presently is holding in liquid short-term investments. IWT’s value of operations is estimated to be about $1,937.5 million; it has $387.5 million in debt and zero preferred stock. As mentioned previously, IWT has 100 million shares of stock outstanding. Assume that IWT has not yet made the distribution. What is IWT’s intrinsic value of equity? What is its intrinsic stock price per share? Now suppose that IWT has just made the $50 million distribution in the form of dividends. What is IWT’s intrinsic value of equity? What is its intrinsic stock price per share? Suppose instead that IWT has just made the $50 million distribution in the form of a stock repurchase. Now what is IWT’s intrinsic value of equity? How many shares did IWT repurchase? How many shares remained outstanding after the repurchase? What is its intrinsic stock price per share after the repurchase?Suppose instead of paying a dividend, Payout Corp. announces that it will repurchase stockwith a market value of $10,000. What happens to the stock price when the repurchaseproposal is announced? subpart d needs to be solvedThe Fourth Corp. is evaluating extra cash dividends versus share repurchases. In either case, $6,675 will be spent. Current earnings are $2.8 per share and the stock currently sells for $67 per share. There are 1,500 shares outstanding. Ignore taxes and any information asymmetry in the financial market. Which of the following is correct? Group of answer choices Shareholder wealth is the same regardless of which payout policy is chosen. Shareholder wealth will be lower if the firm repurchases shares because shares outstanding is reduced as a result of the repurchase. Shareholder wealth will be lower if the firm pays extra cash dividends because share price is lower. Shareholder wealth will be higher if the firm repurchases shares because repurchases can boost share price.
- Plato Corporation’s board announces to pay $2 million excess cash to shareholders. At the announcement, the firm has no debt and 1 million shares outstanding with the market value of equity of $12 million. Assume that the markets are perfect. (i) What is the cum-dividend price? (ii) If the firm distributes the excess cash as a cash dividend, what is the exdividend price? Is the drop in share price the same as the cash dividend per share? Why? (iii) If the firm distributes the excess cash as a share repurchase, what will its share price once the shares are repurchased? (iv) If you hold 1,000 shares and the firm distributes the excess cash as a share repurchase in part (iii). How do you use homemade dividend to receive a cash dividend as in part (ii)?Assume you entered a 1,500 share short position in Pollution Co. at $37/share, which is the only position currently in this trading account. The initial margin you were required to post was 50% and the maintenance margin is 35%. b. If the share price does rise just enough to trigger a margin call,(i) how much margin will remain in the account when you receive the margin and (ii) how much additional cash will you be required to contribute to the account in order to maintain the short position?Based on the free cash flow valuation model, you estimate Tigers Construction's value of operations is $750 million. Its balance sheet shows $50 million of short-term investments that are unrelated to operations, $100 million of accounts payable, $100 million of notes payable, $200 million of long-term debt, $40 million of common stock, and $160 million of retained earnings. Tigers has 10 million shares of stock outstanding. What is the best estimate for the stock price per share ? a. $45.1 b. $52.5 c. $47.5 d. $50.0 e. $42.9
- Suppose that Papa Bell Inc. equity is currently selling for $41 per share, with 3.6 million shares outstanding. The firm also has 8000 bonds outstanding, which are selling at 95% of par. Assume Papa Bell was considering an active change to its capital structure so as to have a D/E ratio of 0.5. Which type of security (stocks or bonds) would the firm need to sell to accomplish this? How much would it have to sell? (Enter your answer in dollars not in millions. Do not round immendiage calculations and round your final answer to 2 decimal places.)Erna Corporation is evaluating an extra dividend versus a share repurchase. In either case, $19,000 would be spent. Current earnings are $1.60 per share and the stock currently sells for $50 per share. There are 2,500 shares outstanding. Ignore taxes and other imperfections. a. Evaluate the two alternatives in terms of the effect on the price per share of the stock and shareholder wealth per share. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) b. What will be the effect on the company’s EPS and PE ratio under the two different scenarios? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Give typing answer with explanation and conclusionYou have estimated that the present value of all future free cash flows of Venice Surf Co. to be $339 million. The company has nonoperating assets of $62 million and nonoperating liabilities of $271 million, and there are 8 million shares of common stock outstanding. Estimate the value of each share using the free cash flow valuation data provided. Present your answer to two decimal places, e.g., $23.45.
- Suppose instead that the company is about to pay a dividend of $2.00 per share. You also learn that the company is expected to have net income of $100 million, dividends of $50 million, and total equity of $1.5 billion (and that these relationships are expected to be stable). If the relevant required rate of return is 10%, what is the intrinsic value per share of the company’s stock?Shares repurchase and the previous problem? Suppose the company had. Announce is going to repurchase $21,850 worth of stock instead of repairing a dividend. What effects would the transaction have on the equity of the firm? How many shares will be outstanding? What will the price per share before the repurchase? Ignoring tax effects, shows how the share repurchase is affectively the same as a cash dividend.Identify and explain the markets in which the following in which the following trade in: used cars, paintings and rare coins. If, An investor initially pays K6 000 towards the purchase of K10 000 worth of shares at K100 each borrowing the rest from a broker, draw up the investor’s simple balance sheet to reflect this transaction and Calculate the initial margin and the margin if the share price falls to K70. Suppose the maintenance margin is 30 %. How far could the stock price fall before the investor would get a margin call? Suppose the margin is 40 %. How far can the stock price fall before the investor gets a margin call? An investor is bullish on a stock selling for K100. He instructs his broker to sell short 1000 borrowed shares. If the broker has a 50 % requirement on short sales, draw up the investor’s simple balance sheet to reflect this transaction. What will happen if the share price falls to K70? If the broker has a maintenance margin of 30 % on short sales,…