The presence of taxes and bankruptcy costs

Assignment Help Financial Management
Reference no: EM131300090

a) RFC Corp. has announced $1 dividend. If RFC's price last price cum-dividend is $50, what should its first ex-dividend price be (assuming perfect capital markets)? Why?

b) Does your answer change in imperfect markets i.e. in the presence of taxes and bankruptcy costs?

Reference no: EM131300090

Questions Cloud

What percentage of the payment represents interest : Set up and amortization for a $25,000 loan to be repaid in equal installments at the end of the next 3 years. The interest rate is 10% compounded annually. What percentage of the payment represents interest and what percentage represents principal fo..
Assume the appropriate discount rate : An investment will pay you $87,000 in five years. Assume the appropriate discount rate is 7.75 percent compounded daily. What is the present value?
Annual deposits into a retirement account : You make $9,900 annual deposits into a retirement account that pays an APR of 9.7 percent compounded monthly. How large will your account balance be in 32 years?
How much interest in total does he pay on credit card debt : Simon recently received a credit card with an 18% nominal interest rate. With the card, he purchased an iPad for $350. The minimum payment on the card is only $10 per month. How much interest in total does he pay on his credit card debt?
The presence of taxes and bankruptcy costs : RFC Corp. has announced $1 dividend. If RFC's price last price cum-dividend is $50, what should its first ex-dividend price be (assuming perfect capital markets)? Why? Does your answer change in imperfect markets i.e. in the presence of taxes and ban..
What nominal rate will you charge your customers : As a jewelry store manager, you want to offer credit sales to your customers, with interest on outstanding balances paid monthly. However, to finance your working capital, you must borrow funds from your bank at a nominal 6%, monthly compounding. For..
How much interest will you earn over the life of the loan : You are lending your friend $25,000. She agrees to repay the loan in equal quarterly payments over a three-year period at an interest rate of 8% compounded quarterly. Using excel functions, answer the following: Set up an amortization schedule for a ..
What are some uses and limitations of financial ratios : How do you think financial ratios differ across different industries? Compare two industries of your choice and select a few ratios and explain whether you think the ratios would be higher or lower for each of those industries and explain why. What a..
Find zero coupon bond with a par value : You find a zero coupon bond with a par value of $10,000 and 22 years to maturity. The yield to maturity on this bond is 4.4 percent. Assume semiannual compounding periods. What is the price of the bond?

Reviews

Write a Review

Financial Management Questions & Answers

  What is annual carrying costs of post card inventory

Post Card Depot, an large retailer of post cards, orders 6,509,060 post cards per year from its manufacturer. Post Card Depot plans on ordering post card 6 times over the next year. Post Card Depot receives the same number of post cards each time it ..

  What is the cost of capital on the stock

Horse and Buggy Inc. is in a declining industry. Sales, earnings, and dividends are all shrinking at a rate of 10% per year. if r = 15% and DIV1 = $4, what is the price of a share? What price do you forecast for the stock one year from now? What is t..

  Sausage system with an installed cost

Symon Meats is looking at a new sausage system with an installed cost of $490,000. This cost will be depreciated straight-line to zero over the project’s five-year life, at the end of which the sausage system can be scrapped for $72,000.

  What is the beta of your portfolio now

Using the information from Problem 12, suppose that you instead decide to invest $20,000 in IBM, $30,000 in LUV, and $50,000 in ODP. What is the beta of your portfolio now?

  Analyse principles and trends in performance measurement

Identify and critically analyse principles and trends in Performance Measurement and Control and determine the different budgeting techniques and critically evaluate their use in short term decision making - Discuss the advantages and disadvantages o..

  The flotation-adjusted cost of equity

Suppose that Tan Lotion's common shares sell for $18 per share, are expected to set their next annual dividend at $1.00 per share, and that all future dividends are expected to grow by 7 percent per year, indefinitely. If Tan Lotion faces a flotation..

  Some much-needed expansion projects

Seether Co. wants to issue new 11-year bonds for some much-needed expansion projects. The company currently has 8.7 percent coupon bonds on the market that sell for $959.22, make semi-annual payments, and mature in 11 years. The company should set a ..

  Qualify to borrow on the payment to income ratios

Suppose your gross monthly income of $7,000. Assume that you expect property taxes and insurance to be $300 per month. In addition, assume you have automobile and student loan payments of $450 per month. If 30 year fixed rate mortgages have a current..

  Calculate value of operations

Mac Industries' free cash flow last year was $ 1million (i.e., FCFo = $1 million). You project the company's free cash flow to grow 20 percent this year (i.e., FCF1 = $1.2 million) and 15 percent next year. After two years its free cash flow is expec..

  Left to maturity and a market interest rate

Compute the price of a 6.2 percent coupon bond with ten years left to maturity and a market interest rate of 8.0 percent.

  Dso and accounts receivable

Harrelson Inc. currently has $715,000 in accounts receivable, and its days sales outstanding (DSO) is 71 days. It wants to reduce its DSO to 35 days by pressuring more of its customers to pay their bills on time. If this policy is adopted, the compan..

  Determine the profit or loss on the contract

You are expecting interest rates to decline. You purchase a T-bill futures contract when the quoted price was 95.34. When this position was closed out, the interest rates declined and the price of the T-bill was now 95.89. Determine the profit or los..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd