Reference no: EM132581965

Question 1: JEN Corp. is expected to pay a dividend of $4.25 per year indefinitely. If the appropriate rate of return on this stock is 11 percent per year, and the stock consistently goes ex-dividend 30 days before dividend payment date, what will be the expected maximum price in light of the dividend payment logistics?

Question 2: Suppose that a company's equity is currently selling for $25.75 per share and that there are 3.7 million shares outstanding and 17 thousand bonds outstanding, which are selling at 96 percent of par. If the firm was considering an active change to their capital structure so that the firm would have a D/E of 1.7, which type of security (stocks or bonds) would they need to sell to accomplish this, and how much would they have to sell? (Round your intermediate ratio to 4 decimal places.)

Question 3: Balloons Inc normally pays a quarterly dividend. The last such dividend paid was $1.55, all future quarterly dividends are expected to grow at 5 percent, and the firm faces a required rate of return on equity of 12 percent. If the firm just announced that the next dividend will be an extraordinary dividend of $2.75 per share that is not expected to affect any other future dividends, what should the stock price be?

Question 4: Suppose a firm pays total dividends of $4.2 million out of net income of $28.2 million. What would the firm's payout ratio be?

Question 5: Calculating Fees on a Loan Commitment You have approached your local bank for a start-up loan commitment for $2,700,000 needed to open an auto repair store. You have requested that the term of the loan be one-year. Your bank has offered you the following terms: size of loan commitment = $2,700,000, term = 1 year, up-front fee = 25 basis points, back-end fee = 40 basis points. If you take down 95 percent of the total loan commitment, calculate the total fees you have paid on this loan commitment.

Question 6: Calculating Costs of Issuing Stock TriState Corp. recently went public with an initial public offering in which they received a total of $50.30 million in new capital funding. The underwriter used a firm commitment offering in which the offer price was $30.75 and the underwriter's spread was $1.80. TriState also paid legal and other administrative costs of $980,000 for the IPO. What is the number of shares issued through this IPO?

Question 7: Calculating Costs of Issuing Stock Paige's Purses, Inc. needs to raise $26.60 million to finance plant expansion. In discussions with its investment bank, Paige's learns that the bankers recommend an offer price (or gross proceeds) of $66 per share and Paige's will receive $49.00 per share. What is the underwriter's spread per share on the issue?