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Santa PLC is an all equity financed company with 100 million shares outstanding trading at €2 per share. Its management has decided to invest in a major new development that will cost € 40 million, and is now considering ways to finance the investment. Various alternatives have been considered but the choice has been narrowed down to a rights issue or the issue of debentures (a kind of bond). The rights issue would be made at a discount of 20% and be underwritten at a cost of 2% of the proceeds. The company's chairman has discussed the proposed investment and its prospects as well as the financing possibilities, quite openly with various institutions and the financial press. As a result it is likely that the share price already reflects the implications of the company's proposed investment.
Evaluate the contention that the shareholders' can expect an earnings yield of 30% on shares bought given a rights issue at a discount of 20%, and that this suggests a relatively high cost of capital.
Indicate the change, if any, expected if the firm declares a 2-for-1 stock split. Indicate the change, if any, expected if the firm declares a 1-for-11/2 reverse stock split. Indicate the change, if any, expected if the firm declares a 3-for-1 stock ..
Netflix Inc. (NFLX) currently trades for $500 a share. A 3-month at-the-money call option on NFLX trades for $25. All options are European and NFLX pays no divi
In January of 1980, a troy ounce of gold sold for $850 (an all-time high). Over the past 28 years, suppose the CPI has grown at a compounded annual rate of 3.2%
Explain why forward contracts have been trading for centuries. What economic function do they perform?
Trudy plans to respond to his client within the context of Modern Portfolio Theory. a. Contrast the concept of systematic and firm-specific risk and give one example of each. b. Critique the client's suggestion. Discuss the impact of the systematic r..
Variance measures the dispersion of points around the mean of a distribution. In this context, we are attempting to characterize the variability of possible future security returns around the expected return. In other words, we are trying to quant..
Why do you think that auto loans have the lowest rejection rates among these credit types?
you are the vice president of international infoxchange headquartered in chicago. all shareholders of the firm live in
What information is included in your credit report?
Cap is trying to convince Widow Jones to purchase some Neotech stock, but she is reluctant because Neotech has never paid a dividend. She depends on steady dividends to provide her with income.
The stock sells for RM28.40 a share at a required return of 14 percent. Calculate the amount of the last dividend this company paid.
Have you ever worked, or can you provide an example of a business or corporation with Unethical business operations/processes?
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