Reference no: EM131107722
Assignment
Style Guidelines: Use 12 pt. times new roman font. Your margins should be set at 1". You should double space your text. Use in-text citations and include a ‘References' page after your text answers. You should use 1 to 2 sources, in addition to the textbook, as references for each question (See Assignment 8 folder for Additional Resources for this assignment in Blackboard). Check your spelling and grammar carefully.
1. Chapter 18: Discuss dividend policy.
2. Chapter 20: Discuss the advantages and disadvantages of mergers/acquisitions and the impact to stakeholders.
3. Chapter 21: Discuss ways a corporation may expand into international markets and the related risks.
SHOW YOUR CALCULATIONS FOR EVERY PROBLEM TO RECEIVE CREDIT
Chapter 18 Problem
4. Arbicom Systems earned $680 million last year and paid out 20 percent of earnings in dividends.
a. By how much did the company's retained earnings increase?
b. With 100 million shares outstanding and stock price of $80, what was the dividend yield? (Hint: First compute dividends per share.)
Chapter 20 Problems
5. AtoZ Enterprises is considering a cash acquisition of Patterson Steel Company for $40,000,000. Patterson will provide the following pattern of cash inflows and synergistic benefits for the next 15 years. There is no tax loss carryforward.
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Years
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1-5
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6-15
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Cash inflow (after tax)
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$5,440,000
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$6,600,000
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Synergistic benefits (after tax)
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500,000
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700,000
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The cost of capital for the acquiring firm is 12 percent. Should the merger be undertaken? (If you have difficulty with deferred time value of money problems, consult Chapter 9.)
6. The Allbright Corporation is considering acquiring the Lincoln Corporation. The data for two companies are as follows:
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Lincoln Corp.
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Allbright Corp.
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Total earnings
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$500,000
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$2,000,000
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Number of shares of stock outstanding
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200,000
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1,000,000
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Earnings per share
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$2.50
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$2.00
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Price-earnings ratio (P/E)
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16
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20
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Market price per share
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$40
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$40
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a. The Allbright Corp. is going to give Lincoln Corp. a 50 percent premium over Lincoln Corp.'s current market value. What price will it pay?
b. At the price computed in part a, what is the total market value of Lincoln Corp.?
c. How many shares must Allbright Corp. issue to buy the Lincoln Corp. at the total value computed in part b? (Keep in mind Allbright Corp.'s price per share is $40.)
d. Given the answer to part d, how many shares will Allbright Corp. have after the merger?
e. Add together the total earnings of both corporations and divide by the total shares computed in part e. What are the new postmerger earnings per share?
g. Why has Allbright Corp.'s earnings per share gone down?
h. How can Allbright Corp. hope to overcome this dilution?
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Indicates the experience of the 10 study participants
: The diagram below indicates the experience of the 10 study participants, using the following symbols:
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Cooperation during a change
: List the drawbacks to using incentives to gain cooperation during a change.
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Whether the economy was recently in recession
: Identify whether each of the following is a flow variable or a stock variable. The total value of all of a company's outstanding bonds. The number of Canadian immigrants living in the United States. Data on recent interest rates can be a good indicat..
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More dilemmas for the prisoners
: (a) For what values of δ, if any, both players choosing the "Tit-for-tat" strategy is a SPE? Consider now the "Pavlov" strategy: "Choose C in period 1. Choose C after any history in which the outcome in the last period is either (C, C) or (D, D). Cho..
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Why has allbright corps earnings per share gone down
: Given the answer to part d, how many shares will Allbright Corp. have after the merger? Why has Allbright Corp.'s earnings per share gone down? How can Allbright Corp. hope to overcome this dilution?
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Quantities of inventory to eliminate shortages
: Why would not a company always store large quantities of inventory to eliminate shortages and stock outs?
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Should the dare program be discontinued
: Are there any other unintended consequences of the DARE Program that should be considered when the program is assessed? If so, what are they and why are they important to consider?
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Availability of healthcare technology
: Your lectures in this course provided an overview of the history and development of U.S. healthcare since America became a nation. Trace the availability of healthcare technology to the American people from 1850 to the present day.
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Characteristics of monopolistic competition
: Firms that operate in industries that have the characteristics of monopolistic competition of monopolistic competition advertise heavily just to get their brand names known and try to convince customers that their products are "unique" while the prod..
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