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Lucky Dog Pet Food has a $1000 convertible bond outstanding with a conversion price of $12.00 per share. The bond pays an interest payment of $80 annually and matures in 20 years unless converted into common stock earlier or called by the company. The common stock currently sells for $11.25 per share. If the bond sold at its theoretical bond value it would be priced competitively to yield 10% with bonds of the same risk class. A. How many shares of stock are received on conversion? B) What is the conversion value? C) What is the pure bond value?
Rudy’s stock is currently valued at $28.40 a share. The firm had earnings per share of $1.86 last year and projects earnings of $2.09 a share for next year. What is the trailing twelve month price-earnings ratio?
An investor has an opportunity to buy a parcel of land for $350,000. He plans to sell it in two years. What will the sale price have to be for the investor to get a 23% constant dollar before-tax ROR with inflation averaging 12% annually?
Nugent Communication Corp. is investing $10,930,700 in new technologies. The company’s management expects significant benefits in the first three years after installation (as can be seen by the following cash flows), and smaller constant benefits in ..
You are considering a project with an initial cash outlay of $80,000 and expected cash flows of $20,000 at the end of each year for six years. The discount rate for this project is 10 percent. What are the project’s payback and discounted payback per..
Phone home inc. is considering a new 4 year expansion project that requires an initial fixed asset investment of $3 million. The fixed asset will be depreciated straight-line to 0 over it's 4 year tax life, after which time it will have a market valu..
Assume that the spot FX rate ($/SGD)=0.3000, and tHe (PHP/SGD)=2.0000 (where SGD is the Singapore dollar, and PHP is the Phillipine Peso). Also assume that (PHP/$)=5.0000. Given this information, what is the arbitrage profit to a U.S. investor from c..
Constant Growth Valuation Boehm Incorporated is expected to pay a $2.40 per share dividend at the end of this year (i.e., D1 = $2.40). The dividend is expected to grow at a constant rate of 10% a year. The required rate of return on the stock, rs, is..
A zero coupon bond matures in 5 years with a par value of $1000 and is currently selling at YTM of 8%. What would be the approximate price of this bond if required rate of return drops to 6% using duration and convexity formula? What is the actual pr..
Which of the following statements regarding corporate bonds is most correct?
The expected return on the S&P 500 index is 12%. The return on the T-bill is 5%. The standard deviation of return on the S&P 500 index is 18%. Investors can form portfolios from these 2 securities. Suppose investors have a utility function of the fol..
Will the hypothesis test procedure prove that the containers are filled to an amount different from 30 ounces?
Siva, Inc., imposes a payback cutoff of three years for its international investment projects. Year Cash Flow (A) Cash Flow (B) 0 –$ 57,000 –$ 67,000 1 21,500 13,500 2 25,000 16,500 3 19,500 23,000 4 6,500 227,000 What is the payback period for both ..
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