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The Clifford Corporation has announced a rights offer to raise $36 million for a new journal, the Journal of Financial Excess. This journal will review potential articles after the author pays a nonrefundable reviewing fee of $4,000 per page. The stock currently sells for $44 per share, and there are 1.8 million shares outstanding. a. What is the maximum possible subscription price? What is the minimum? (Leave no cells blank - be certain to enter "0" wherever required.) The maximum possible subscription price is $ The minimum price is anything greater than $ 0 b. If the subscription price is set at $40 per share, how many shares must be sold? How many rights will it take to buy one share? (Do not round intermediate calculations. Round your rights needed answer to 2 decimal places, e.g., 32.16.) Number of new shares Number of rights needed 25.89 c. What is the ex-rights price? What is the value of a right? (Do not round intermediate calculations. Round your answers to 2 decimal places, e.g., 32.16.) Ex-rights price $ Value of a right $ d. A shareholder with 500 shares before the offering has no desire (or money) to buy additional shares offered as rights. What is his portfolio value before and after the rights offer? (Do not round intermediate calculations and round your final answers to nearest whole number, e.g., 32.) Portfolio value before rights $ Portfolio value after rights $
Seth McDonald grows corn. In May, he decides to sell 3 contracts, about half of his expected crop, for December delivery. The contract price is $3.65 per bushel and the contract size is 5,000 bushels. Shortly before the delivery date, corn is selling..
Consider the choice between $25,000 today or $1,000 per year for 30 years, with investors caring only about the time value of money. Which of the following is true?
Apocalyptica Corp. pays a constant $8.60 dividend on its stock. The company will maintain this dividend for the next 11 years and will then cease paying dividends forever. If the required return on this stock is 11 percent, what is the current share ..
Your company has a required rate of return 7%. The company has completed a new project that is expected to grow dividends at a rate of 50% the first year and 25% the following year, after which growth should be at a constant rate of 6%. The last divi..
Calculate the NPV for a 30 year old project with a initial investment of $35,000 and a cash inflow of $8,000 per year. Assume the firm has an opportunity cost of 13%.
How is the maximum expected loss on a stock affected by an increase in the volatility (standard deviation), based on a 95 percent confidence interval?
"Lowe's has 100,000 shares of common stock outstanding at a market price of $40 a share. There are 10,000 shares of 8 percent preferred stock outstanding at a market price of $30 a share. The firm has 1000 bonds outstanding with a face value of $1,00..
Several years ago, Castles in the Sand Inc. issued bonds at face value of $1,000 at a yield to maturity of 5.8%. Now, with 5 years left until the maturity of the bonds, the company has run into hard times and the yield to maturity on the bonds has in..
For the given cash flows below, assume the cash flow is the same in the next 2 years. Compute the NPV for each project, and compute the incremental IRR. Compare and explain why NPV always gives the correct decision. Compare and contrast the uses of b..
The 7 percent annual coupon bonds of IPO, Inc. are selling for $1,021. The bonds have a face value of $1,000 and mature in seven years. What is the yield to maturity?
How much cash flow before tax and interest is necessary to support a project that requires $4 million annually for equity investors and $2 million annually in interest payments if the firm's tax rate is 35%?
You need to accumulate $74,900 for your son's education. You have decided to place equal year-end deposits in a savings account for the next 10 years. The savings account pays 3,44 percent per year, compounded annually. How much will each annual paym..
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