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Suppose that Company XYZ is considering purchasing shares of Company ABC. ABC has 30 million shares outstanding and trades at $60 per share on January 1, 2015. ABC shares trade at $62 per share as of December 31, 2015 and pay a dividend of $1 per share in 2015. Net income of ABC for 2015 is $4 per share ($120 million in total).
12.On January 1, 2015, XYZ purchases 1 million shares of Polaris for $60 million in cash. The shares are classified as securities available for sale.
Effect on 2015: Pretax Income: $____________
Total Assets: $____________
Total Shareholder’s Equity: $____________
Greta, an elderly investor, has a degree of risk aversion of A = 4 when applied to return on wealth over a 3-year horizon. She is pondering two portfolios, the S&P 500 and a hedge fund, as well as a number of 3-year strategies. Assuming the correlati..
Evaluate appropriate sources of finance for the DigiLink project in terms of suitability and their respective advantages and disadvantages.
Their planned capital budget for the upcoming year is $100.5 million. Their forecasted net income is $150.0 million. The firm has $50.0 million in short-term investments. The firm’s value of operations is $1,937.5 million. Calculate, based on the exi..
Itex Corporation would like to know what information federal agencies have about its competitors may be able to learn about it. Under what federal law can Itex require the agencies to disclose whatever information they may have concerning the company..
Consider the following capital market: a risk-free asset yielding 1.00% per year and a mutual fund consisting of 65% stocks and 35% bonds. The expected return on stocks is 11.75% per year and the expected return on bonds is 4.25% per year. What is th..
The Saunders Investment bank has the following financing outstanding. Debt: 70,000 bonds with a coupon rate of 10 percent and a current price quote of 110; the bonds have 20 years to maturity. 240,000 zero coupon bonds with a price quote of 20 and 30..
The current price of a stock is $50, the annual risk-free rate is 6%, and a 1-year call option with a strike price of $55 sells for $7.20. What is the value of a put option, assuming the same strike price and expiration date as for the call option?
Gronseth Drywall? Systems, Inc., is in discussions with its investment bankers regarding the issuance of new bonds. The investment banker has informed the firm that different maturities will carry different coupon rates and sell at different prices. ..
A project has an initial cost of $40,000, expected net cash inflows of $9,000 per year for 7 years, and cost of capital of 11%. What is the project's NPV? Payback: refer to the problem, what is the project's payback period?
Your Company is evaluating the acquisition of a new piece of equipment that has an installed cost of $ 10,000,000. The equipment will add $2,000,000 to earnings before interest and taxes each year for the next 12 years. Calculate the payback period f..
Which of the following bonds makes no interest payments?
Assume that the demand for chalk is = 8 -0.1, where P is the market price and Q is the total market output measured in thousands of boxes of chalk. Suppose that there are three firms in this industry, each of which has a constant variable cost of $2...
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