Common stock

The Cost of Capital LEARNING OBJECTIVES After reading this chapter, students should be able to: • Explain what is meant by a firm’s weighted average cost of capital. • Define and calculate the component costs of debt and preferred stock. • Explain why retained earnings are not free and use three approaches to estimate the component cost of retained earnings. • Briefly explain why the cost of new equity is higher than the cost of retained earnings, calculate the cost of new

$160 million is much lower than the actual value once the R&D expense is reallocated. At the same time since the IPD division does not share synergies with the other divisions it is recommended to either spin off the division or institute a tracking stock to make its actual value transparent to the market and thereby prepare it for a future sale. In order to raise the capital for a capacity expansion for the high growth Environmental Products division we recommend

Fin 3320 Practice Questions1 – Total Course 1. Your wealthy uncle has set up a special account that will give you $500,000 on your 35th birthday. Assuming you are age 21 (thus 14 years from receiving this), what is the present value of this gift if the appropriate discount rate is 8.0%? (Ch5) a. $170,231 b. $282,449 c. $442,619 d. $191,206 e. $734,664 2. You need $10,900 for the down payment on a new car. You presently have $5,000 in savings for which you expect to earn 6% (annual rate, compounded

Financial Management (Case Study-1) Reliance Industries Limited Triple Option Convertible Debentures Submitted By: Group-8: Abhishek Kumar (BLP038) Aparna Chowdhry (BLP040) Maninder Bisen (BLP042) Vivek Kumar (BLP044) Manjesh Bharati (BLP046) Raman Girdhar (BLP048) Question-1: Discuss in detail the benefits of convertible securities for the issuing company as well as the investors. Briefly discuss the potential

Answers to Self–Check Test 11 Part A: Multiple Choice 1. c 2. c 3. e 4. d 5. e 6. c 7. a 8. d 9. a 10. d Explanations to selected multiple choice questions: 2. [pic] 4. [pic] 6. [pic] 7. The value of retained earnings is a part of the shareholder’s equity, and is reflected in the market value of equity. It should be included in the calculating the market value of equity. 8. All investors will receive their required

If the tax rate is 40 percent, what is the company’s WACC? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) WACC _____ % 12. Filer Manufacturing has 7 million shares of common stock outstanding. The current share price is $79, and the book value per share is $6. The company also has two bond issues outstanding. The first bond issue has a face value $70 million, a coupon of 8 percent, and sells for 94 percent of par. The second

that we can buy and assuming that the price is going up. Put option is a bearish strategy, which means that the stock price is going down and individuals can make money. Trading stocks are more risky than options. Put Option • The options that gives the right to sell the stock at the specific price, also known as strike price at a future date. • The put options allows to gain if the stock price falls. • In the portfolio, it protects the portfolio and lock in gains. Exercise price:- • Price of the

smaller chocolate candy manufacturers. Stock Comparisions Stocks between both Hershey Company and Tootsie Roll Industries are similar in nature; however, due to the vast line of products available between the two companies; Hershey comes out ahead with more products to their line. According to current stock numbers, though Tootsie Roll went public in 1922, Hershey, that went public in 1927, has remained the leader. As far as the lowest and highest stock prices have gone in the past 52 weeks, Tootsie

understanding of some common terms like the notional amount or also known as the borrowed amount, maturity or renewal date and interest rate. Debt securities involves corporate, government and municipal bonds, CDs, collateralized securities ( like CDOs, CMOs, GNMAs) and zero coupon securities. (Investopedia, 2015). On the financial records, the debt securities are documented in the type of bonds, collateralized securities and preferred stocks. How are the corporation 's stock investments reported

Purpose of a company’s 10-K The 10-K report is an annual report. The purpose of the report is to give a lot of information in detailed from like a picture of the organization 's business, it shows the risks and also the operating and financial results for the year. The company will also use this report to help them see what is helping them and what is not helping them (Security, 2011). A lot of organizations must report a 10-K every year and they must file it with the U.S. Securities and Exchange