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1. The price of Ervin Corp. stock will either be $64 or $90 at the end of the year. Call options are available with one year until expiration. Continuously compounded T-bills currently yield 3.7 %. Suppose the current price of Ervin stock is $78.
What if the strike price is $55 per share? (Round answer to 2 decimal places. Do not round intermediate calculations).
2. The 2008 balance sheet of Maria's Tennis Shop, Inc., showed $2.95 million in long-term debt, $710,000 in the common stock account, and $6.5 million in the additional paid-in surplus account. The 2009 balance sheet showed $4.05 million, $905,000, and $8.25 million in the same three accounts, respectively. The 2009 income statement showed an interest expense of $360,000. The company paid out $590,000 in cash dividends during 2009. If the firm's net capital spending for 2009 was $760,000, and the firm reduced its net working capital investment by $135,000, the firm's 2009 operating cash flow, or OCF?
$-1,470,000
$-2,095,000
$-3,900,000
$2,365,000
$-2,650,000
Explain what is meant by the clientele effect. Explain what is meant by the informational content of dividend policy. Explain what is meant by the signaling effects of dividend policy.
A negative net cash inflow on a cash budget indicates that a firm:
Suppose your firm uses the NPV rule in making investment decisions and your after-tax OCF is $900000. What will be the before-tax OCF?
The initial installed cost for a new piece of equipment is $10,000. After the equipment has been in use for 4 years, it is sold for $7,000. The company that originally owned the equipment employs a straight-line method for determining depreciation co..
Determine the target revenue figure, and explain why you do or do not feel that the company hit its target.
What do you conclude about the relationship between the required return and the stock price?
Your division is considering two investment projects, each of which requires an up-front expenditure of $17 million.
Dinklage Corp. has 6 million shares of common stock outstanding. The current share price is $89, and the book value per share is $8. The company also has two bond issues outstanding. What are the company's capital structure weights on a book value ba..
In the governmental fund types, expenditures are generally recognized when resources are acquired. Liabilities are generally recognized if they will be liquidated with available expendable financial resources. Define “available.” Relate the definitio..
You are offered an investment opportunity the "guarantee" that your investment will double in 5 years. what annual rate of return would this investment provide?
The “real” rate of interest excludes everything except inflation. Default risk is the chance or probability of financial loss from a venture investment.
Jaster Jets has $9 billion in total assets. Its balance sheet shows $1.8 billion in current liabilities, $5.4 billion in long-term debt, and $1.8 billion in common equity. It has 700 million shares of common stock outstanding, and its stock price is ..
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