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A firm has decided to go public by selling $10,000,000 of new common stock. Its investment bankers agreed to take a smaller fee now (7% of gross proceeds versus their normal 12%) in exchange for a 1-year option to purchase an additional 300,000 shares at $5.00 per share. The investment bankers expect to exercise the option and purchase the 300,000 shares in exactly one year, when the stock price is fore-casted to be $4.50 per share. However, there is a chance that the stock price will actually be $10.00 per share one year from now. If the $10 price occurs, what would the present value of the entire underwriting compensation be? Assume that the investment banker's required return on such arrangements is 18%.
Inflex Corp. uses credit terms of 3/15 net 40. 30% of their customers take advantage of the discount and pay on day 15, 70% of their customers pay on day 40. What is Inflex Corp.'s days sales outstanding? Please show work.
show that in this example VaR does not satisfy the subadditivity condition whereas expected shortfall does.
question oneassume as a vc that you want to establish a pre- and post-money valuation in support of the issuance of a
How can the free cash flow approach to valuing the company be employed to solve the valuation challenge present by firms that do not pay dividends?
To maximize amount of income realized from a rate increase, charges should be raised most in departments with:
Knight Inc. is expected to pay a $1.80 dividend next year. The dividend in year 2 is expected to be $2.10. The dividend in year 3 is expected to be $2.50. After that, the dividend is expected to grow at a constant rate of 2%. The cost of capital i..
Over the last 3 years you earned 5%, 7% and 9%. What is the Average rate of Return of your investment?
Randy, age 63, is a participant in the stock bonus plan of XYZ, Inc., Which of the following correctly describes Randy's tax consequences in year 6 from this distribution if Randy does not sell the XYZ stock until year 8?
Calculate the expected earnings per share (EPS) for Graham & Sons for each of the next 5 years (2013-2017) without the merger.
following is the information for two stocks: stock D 10.0% expected return and 8% standard deviation. Stock E 36% expected return and 24% standard deviation. Which investment has the greater relative risk?
If yen fell against dollar such that 1 dollar would purchase= 154.4 yen when invoice was paid, what dollar amount would DeGraw actually get after it exchanged yen for U.S. dollars?
Multiple choice questions on Cash flow method and sources of external capital and What does the free cash flow method of business valuation focus on?
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