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The Collins Co. has just gone public. Under a firm commitment agreement, the company received $32.20 for each of the 4.12 million shares sold. The initial offering price was $34.60 per share, and the stock rose to $41.40 per share in the first few minutes of trading. The company paid $907,000 in legal and other direct costs and $254,000 in indirect costs.
What was the flotation cost as a percentage of funds raised?
(Cost of preferred stock) The preferred stock of Walter Industries Inc. currently sells for $35.67 a share and pays $2.49 in dividends annually. What is the firm's cost of capital for the preferred stock?
WACC and Optimal Capital Structure F. Pierce Products Inc. is considering changing its capital structure. F. Pierce currently has no debt and no preferred stock, but would like to add some debt to take advantage of low interest rates and the tax shie..
A firm purchases materials on terms of 3/15, net 40 and it can borrow the funds from a bank at an APR of 30%. Should the firm use the bank loan by taking the discount or the full credit period by giving up the discount? Show your work including nomin..
At year-end 2013, Wallace Landscaping’s total assets were $1.6 million and its accounts payable were $315,000. Sales, which in 2013 were $2.1 million, are expected to increase by 20% in 2014. Total assets and accounts payable are proportional to sale..
You've worked out a line of credit arrangement that allows you to borrow up to $40 million at any time. The interest rate is .56 percent per month. In addition, 4 percent of the amount that you borrow must be deposited in a non-interest-bearing accou..
Briefly discuss some variants of the basic interest rate and currency swaps diagrammed in the chapter.
A public company has a book value of $128 million. They have 20 million share outstanding with a market price of $4 per share. What inference can be drawn about the market's opinion on the company's assets?
Determine the annual financing cost of a 6-month $20,000 discounted bank loan at a stated annual interest rate of 10 percent. Assume that no compensating balance is required.
Determine the two possible stock prices for the next period.- Determine the intrinsic values at expiration of a European call option with an exercise price of $25.
On December 1, 2015, Bernadine sold a Machine for $100,000. The Machine had originally cost $140,000 and, over the years, Bernadine had claimed $60,000 in depreciation. How much of the gain will be taxed at ordinary income rates? (section 1245 recapt..
Default Risk Premium A Treasury bond that matures in 10 years has a yield of 5%. A 10-year corporate bond has a yield of 7.5%. Assume that the liquidity premium on the corporate bond is 0.35%. What is the default risk premium on the corporate bond?
Do you find support for the assertion that investors are, indeed, becoming fearful? Do they have reason to be?
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