QUESTION Figurate Industries has 750,000 shares of cumulative preferred stock outstanding. It has passed the last three quarterly dividends of $2.50 per share and now (at the end of the current quarter) wishes to distribute a total of $12 million to its shareholders. If Figurate has 3 million shares of common stock outstanding, how large […]
QUESTION Bond valuation Lahey Industries has outstanding a $1,000 par-value bond with an 8% coupon interest rate. The bond has 12 years remaining to its maturity date.a. If interest is paid annually, find the value of the bond when the required return is (1) 7%, (2) 8%, and (3) 10%.b. Indicate for each case in […]
QUESTION Relationship between future value and present valueMixed stream Using the information in the accompanying table, answer the questions that follow.Year (t)Cash flow1$ 800290031,00041,50052,000a. Determine the present value of the mixed stream of cash flows using a 5% discount rate.b. How much would you be willing to pay for an opportunity to buy this stream, […]
QUESTION Time value Jim Nance has been offered an investment that will pay him $500 three years from today.a. If his opportunity cost is 7% compounded annually, what value should he place on this opportunity today?b. What is the most he should pay to purchase this payment today?c. If Jim can purchase this investment for […]
QUESTION ETHICS PROBLEM The SEC is trying to get companies to notify the investment community more quickly when a material change will affect their forthcoming financial results. In what sense might a financial manager be seen as more ethical if he or she follows this directive and issues a press release indicating that sales will […]
QUESTION Pro forma income statement Euro Designs, Inc., expects sales during 2013 to rise from the 2012 level of $3.5 million to $3.9 million. Because of a scheduled large loan payment, the interest expense in 2013 is expected to drop to $325,000. The firm plans to increase its cash dividend payments during 2013 to $320,000. […]
QUESTION 1. Accounts receivable management An evaluation of the books of Blair Supply, which follows, gives the end-of-year accounts receivable balance, which is believed to consist of amounts originating in the months indicated. The company had annual sales of $2.4 million. The firm extends 30-day credit terms.Month of originAmounts receivableJuly$ 3,875August2,000September34,025October15,100November52,000December193,000Year-end accounts receivable$300,000a. Use the […]
QUESTION 1. Balance sheet preparation Adam and Arin Adams have collected their personal asset and liability information and have asked you to put together a balance sheet asof December 31, 2012. The following information is receivedfrom the Adams family.Cash$ 300Retirement funds, IRA$ 2,000Checking3,0002011 Sebring15,000Savings1,2002010 Jeep8,000IBM stock2,000Money market funds1,200Auto loan8,000Jewelry and artwork3,000Mortgage100,000Net worth76,500Medical bills payable250Household furnishings4,200Utility […]
QUESTION Average corporate tax rates Using the corporate tax rate schedule given in Table 2.1, perform the following:a. Calculate the tax liability, after-tax earnings, and average tax rates for the following levels of corporate earnings before taxes: $10,000; $80,000; $300,000; $500,000; $1.5 million; $10 million; and $20 million.b. Plot the average tax rates (measured on […]
QUESTION The Byer Corporation, which has a 16 percent after-tax cost of capital, is considering the acquisition of the Cellar Company, which has about the same degree of systematic risk. If the merger were effected, the incremental cash flows would be as follows:AVERAGE FOR YEARS (in millions)1561011151620Annual cash income attributable to Cellar$10$15$20$15Required new investment251010Net after-tax […]
