QUESTION Last year Gator Getters, Inc. had $50 million in total assets. Management desires to increase its plant and equipment during the coming year by $12 million. The company plans to finance 40% of the expansion with debt and the remaining 60% with equity capital. Bond financing will be at a 9% rate and will […]
Date: September 2nd, 2020
QUESTION What are the main distinctions between a traditional financial instrument and a derivative financial instrument? atives are mainly hedging and speculation. Usually contracts of traditional financial instruments are fulfilled by delivery of instruments along with corresponding monetary settlement. Financial derivatives are usually settled through just the payment of the difference amount of the contract […]
Date: September 2nd, 2020
QUESTION Future value of an annuity. Your client is 40 years old and she wants to begin saving for retirement with the first payment to come one year from now. She can save $5000 per year and you advise her to invest it in the stock market, which you expect to provide an average return […]
Date: September 2nd, 2020
QUESTION (Warrants Issued with Bonds and Convertible Bonds) Incurring long-term debt with an arrangement whereby lenders receive an option to buy common stock during all or a portion of the time the debt is outstanding is a frequent corporate financing practice. In some situations the result is achieved through the issuance of convertible bonds; in […]
Date: September 2nd, 2020
QUESTION stop-n-Shop operates a downtown parking lot containing 800 parking spaces. The lot isopen 2500 hours per year. The parkingcharge per car is 50 cents per hour; the aerage customer parks two hours . Stop-n-Shop rents the lot for $7250 per month. The lot supervisoris paid $24,000 per year. Five employees who handle the parking […]
Date: September 2nd, 2020
QUESTION On January 1, 2012, Barwood Corporation granted 5,000 options to executives. Each option entitles the holder to purchase one share of Barwoods $5 par value common stock at $50 per share at any time during the next 5 years. The market price of the stock is $65 per share on the date of grant. […]
Date: September 2nd, 2020
QUESTION Tapley Inc. recently hired you as a consultant to estimate the companys WACC. You have obtained the following information. (1) Tapleys bonds mature in 25 years, have a 7.5% annual coupon, a par value of $1,000, and a market price of $936.49. (2) The companys tax rate is 40%. (3) The risk-free rate is […]
Date: September 2nd, 2020
QUESTION (EPS with Warrants) Worth Corporation earned $260,000 during a period when it had an average of 100,000 shares of common stock outstanding. The common stock sold at an average market price of $15 per share during the period. Also outstanding were 30,000 warrants that could be exercised to purchase one share of common stock […]
Date: September 2nd, 2020
QUESTION 1) Manilow Company issued $600,000, 9%, 20-year bonds on January 1, 2006, at 103. Interest is payable semiannually on July 1 and January 1. Manilow uses straight-line amortization for bond premium or discount.InstructionsPrepare the journal entries to record the following.(a) The issuance of the bonds.(b) The payment of interest and the premium amortization on […]
Date: September 2nd, 2020
QUESTION John is watching an old game show rerun on television called Lets Make a Deal in which the contestant chooses a prize behind one of two curtains. Behind one of the curtains is a gag prize worth $150, and behind the other is a round-the-world trip worth $7,200. The game show has placed a […]
Date: September 2nd, 2020
