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Douglass Trucking issued 120,000 shares of stock last week. The underwriters charged an 8.5 percent spread in exchange for agreeing to a firm commitment. The legal and accounting fees amounted to $395,000. The company incurred $70,000 in indirect costs. The offer price was $25 a share. Within the first half hour of trading, the stock price increased to $28 a share. What was the flotation cost as a percentage of the funds provided by investors?
(Hint: First find the gross proceeds of the offer by multiplying the number of shares issued by the offer price. Then sum up the legal and accounting fees, indirect costs and underwriter spread times gross proceeds to find total issuance cost. This total issuance cost divided by gross proceeds is flotation cost as a percentage of funds raised.)
A share of stock will pay a dividend of $1.1 one year from now, with dividend growth of 4.4 percent thereafter. According to the constant dividend growth model, if the required return is 14.7 percent, what should the value of the stock be 2 years fro..
A bond trader purchased each of the following bonds at a yield to maturity of 8%. Immediately after she purchased the bonds, interest rates fell to 7%. What is the percentage change in the price for each bond after the decline in interest rates?
What is the effect of external cash flows to TWR and MWR in the following scenarios? Additions to the portfolio prior to a period of weak performance. Withdrawals from the portfolio prior to a period of weak performance
Suppose Apple produces 10,000 MacBooks in December of 2013 with an estimated market value of 2,000 each. None of those are sold until sometime in the spring of 2014. How much would GDP increase in 2014?
Sarah is using the needs approach to determine how much life insurance to buy. Her cash needs are $30,000; her income needs are $140,000; and special needs are $100,000. Sarah has the following assets: $20,000 in bank accounts, $30,000 in retirement ..
Landmark Coal operates a mine. During July, the company obtained 500 tons of ore, which yielded 250 pounds of gold and 63,700 pounds of copper. The joint cost related to the operation was $500,000. Gold sells for $325 per ounce and copper sells for $..
Suppose you own stock in a company. The current price per share is $25. Another company has just announced that it wants to buy your company and will pay $35 per share to acquire all the outstanding stock. Your company management immediately begins f..
Discuss (worldwide), which countries were the largest recipient and source countries of FDI last year? Why? How would you use this knowledge as a global leader?
It represents the most recent years operations, which ended yesterday. Your Supervisor in the controller’s office has just handed you a memorandum asking for written responses to the following questions: If sales should increase by 25%, by what perce..
A US Industries bond has an 8 percent coupon rate and a $1,000 face value. Interest is paid semi-annually, and the bond has 20 years to maturity. If investors require a 10 percent yield to maturity, what is the bond’s value?
Which of the following actions would decrease a firm's liquidity? Which of the following would normally occur if a firm increases its investment in current assets?
Which of the following dividend policies will cause dividends per share to fluctuate the most?
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