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The Marigold Corporation issued 10-year, $4,910,000 par, 7% callable convertible subordinated debentures on January 2, 2017. The bonds have a par value of $1,000, with interest payable annually. The current conversion ratio is 13:1, and in 2 years it will increase to 19:1. At the date of issue, the bonds were sold at 97. Bond discount is amortized on a straight-line basis. Marigold's effective tax was 40%. Net income in 2017 was $8,750,000, and the company had 2,175,000 shares outstanding during the entire year.
Compute both basic and diluted earnings per share.
Compute the return the firm should earn given its level of risk. Determine whether the manager is saying the firm is undervalued or overvalued.
Ballentine Inc., which has a zero tax rate due to tax loss carry-forwards, is considering a 6-year, $5,000,000 bank loan in order to buy a new piece of equipment. The loan will be amortized over 6 years with end-of-year payments and has an interest r..
On an average day, a company writes checks totaling $1,500. These checks take 7 days to clear. The company receives checks totaling $1,800. These checks take 4 days to clear. The cost of debt is 9%. What is the firm's net float? A. $-3,300 B. $-300 C..
The current price of Pastelle Corporation stock is $25. In each the next year, this stock price will either go up by 20% or go down by 20%. The stock pays no dividends. The one-year risk-free interest rate is 6% and will remain constant. What is the ..
Jones Auto Sales calculates its “4%” ?nancing as follows. What effective annual interest rate is being charged?
Trader A enters into futures contracts to buy 1 million euros for 1.4 million dollars in three months. Trader B enters in a forward contract to do the same thing. The exchange (dollars per euro) declines sharply during the first two months and then i..
Heavy Rain Corporation just paid a dividend of $3.96 per share, and the firm is expected to experience constant growth of 2.17% over the foreseeable future. The common stock is currently selling for $74.35 per share. What is Heavy Rain’s cost of reta..
A major lottery advertises that it pays the winner $10 million. However this prize money is paid at the rate of $500,000 each year (with the first payment being immediate) for a total of 20 payments. What is the present value of this prize at 10% ..
Assuming the market is in equilibrium, what does the market believe will be the stock price at the end of 3 years?
Complete each of the following problems, and be sure to show your work with the appropriate formulation of the basic time value of money formula. Irrigated farmland in Phillips County has been selling at $6,000 per acre. If this farmland is expected ..
Gluon Inc. is considering the purchase of a new high pressure glueball. It can purchase the glueball for $120,000 and sell its old low-pressure glueball, which is fully depreciated, for $20,000. What is the equivalent annual savings from the purchase..
Why is the stock market not the primary source of external financing for businesses? What is the primary source of external financing and why?
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