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9. The Griffey-Lang Food Company faces a difficult problem. In management's effort to grow the business, they accrued a debt of $150 million while the value of the company is only $125 million. Management must come up with a plan to alleviate the situation in one year or face certain bankruptcy. Also upcoming are labor relations meetings with the union to discuss employee benefits and pension funds. Griffey-Lang at this time has three choices they can pursue:
1) Launch a new, relatively untested product that if successful (probability of .12) will allow G-L to increase the value of the company to $200 million,2) Sell off two food production plants in an effort to reduce some of the debt and the value of the company thus making it even (.45 probability of success), or3) Do nothing (probability of failure = 1.0).
a. As a creditor, what would you like Griffey-Lang to do, and why?b. As an investor?c. As an employee?
Using Costco wholesale company, incorporate the effect of the Employee Stock Option consider into the common equity valuation. Be sure to plan both the forecasted ESO grants and outstanding ESOs.
Write down the advantages of the organization existing as a single entity.
Suppose the expected return on the market portfolio is 15% and the riskless return is 9 percent. Also assume that all of the projects listed here are perpetuities with annual cash flows and betas as indicated.
Evaluate the future value of $1000 continuously compounded for:
Ray Sutton has worked in the management services division of Strategic Consultants for the last five years. He currently earns and yearly salary of about 95,000.
ADRs are considered an effective way for firms to improve the liquidity of their stock.
Objective type questions on annual interest rate and accounts receivable and In a perpetual inventory system, the cost of purchases is debited to
Suppose you are offered two jobs. One initially pays $100,000 annually, and your salary will grow annually at 11.5 percent. The other pays $97,000 yearly but your salary will grow at 12%.
Throughout 2007, Gorilla Corporation has net short-term capital gains of $90,000, net long term capital losses of $570,000, and taxable income from other sources of $1.5 million. Prior years' transactions included the following:
Present your own company's dividend policy or research a publicly-held company's dividend policy and summarize your findings. Include whether the company has changed its policy in the last few years.
Determine the expected constant growth rate of dividends for a stock currently priced at $50, that just paid a dividend of $4,
Kish's beta coefficient can be discovered as a weighted average of its stocks betas. The risk free rate is 6 percent, and you believe the following probability distribution future market returns is realistic:
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