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Given the results of Problem 19.6, suppose that the merged firm has 1000 shares outstanding.
Furthermore, suppose that the shareholders decide to issue $1000 of new debt (which is not subordinate to outstanding debt), maturing in four years, and invest the proceeds in marketable securities, so that the new value of the merged firm is $5000.
What will be the new price per share? Assume the merged firms instantaneous variance is unchanged by this investment.
A bond has the following terms: Annual interest 100 , Term 15 Years, Principal $1000 a. What is the current price of the bond if comparable yields are 7 percent? b. What are the current yield and yield to maturity given the price of the bond in the p..
A call option is currently selling for $6.40. It has a strike price of $55 and six months to maturity. A put option with the same strike price sells for $7.40. The risk-free rate is 5.3 percent, and the stock will pay a dividend of $2.70 in three mon..
How would you allocate your investment among the following primary asset classes, equities (stocks), fixed income (bonds), real estate, gold, and money market (cash)? Please note that your asset allocation should be based whether you are a conservati..
Alden Trucking Company is replacing part of their fleet of trucks by purchasing them under a note agreement with Kenworthy on January 1, 2014. Alden financed $39,052,588, and the note agreement will require $10.04 million in annual payments starting ..
Consider a four-year project with the following information: initial fixed asset investment = $450,000; straight-line depreciation to zero over the four-year life; zero salvage value; price = $26; variable costs = $16; fixed costs = $140,000; quantit..
The personal income tax in the United States is very different from a comprehensive income tax. Discuss how income distribution and resource use would change if a flat-rate tax on comprehensive income were substituted for the current progressive inco..
Write a computer spreadsheet that computes the Black-Scholes value on row 4 as a function of its five inputs in the first two rows.
Managerial positions execute strategies and best practices on the job in an effort to ensure the annual auditor's report is unqualified. identify the elements in an auditor's report that are needed for an organization in the United States. How does a..
The panther corporation is working at full prduction capacity producing 12000 units of a unique product everlast. Determine the formula for calculating the opportunity cost the calculate the opportunity cost of producing the 3500 units of stron glast..
Steve is a contract carrier for the United States Postal Service. He has been hauling mail for nearly thirty years. His current contract is to haul mail between 20 cities in the eleven western states. Determine the cash flows associated with the diff..
A US company knows it will have to pay 3 million euros in three months. The current exchange rate is 1.4500 dollars per euro. Discuss how forward and options contracts can be used by the company to hedge its exposure.
TwitterMe, Inc., is a new company and currently has negative earnings. The company’s sales are $2,500,000 and there are 210,000 shares outstanding. If the benchmark price-sales ratio for the company is 5.7, how much will you pay for the stock? If the..
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