Reference no: EM13202544
VALUATION BASICS
A best-selling author decides to cash in on her latest novel by selling the rights to the book's royalties for the next four years to an investor. Royalty payments arrive once per year, starting one year from now. In the first year, the author expects $400,000 in royalties, followed by $300,000, then $100,000, then $10,00 in the three subsequent years. If the investor purchasing the rights to royalties requires a return of 7 percent per year, what should the investor pay?
BOND PRICES AND INTEREST RATES
Bennifer Jewelers recently issued ten-year bonds that make annual interest payments of $50. Suppose you purchased one of these bonds at par value when it was issued. Right away, marked interest rates jumped, and the YTM on your bond rose to 6 percent. What happened to the price of your bond?
THE ESSENTIAL FEATURES OF PREFERRED AND COMMON STOCK
The equity section of the balance sheet for Hilton Web-Cams looks like this:
Common stock $0.25 par $400,000
Paid-in capital in excess of par $4,500,000
Retained earnings $1,100,000
a) How many shares has the company issued?
b) What is the book value per share?
c) Suppose that Hilton Web-Cams has made only one offering of common stock. At what price did it sell shares to the market?
PRIMARY MARKETS AND ISSUING NEW SECURITIES
Owners of the Internet bargain site FROOGLE.com have decided to take their company public by conducting an initial public offering of common stock. They have agreed with their investment banker to sell 3.3 million shares to investors at an offer price of $14 per share. The underwriting spread is 7 percent.
a) What is the net price that FROOGLE.com will receive for its shares?
b) How much money will FROOGLE.com raise in the offering?
c) How much do FROOGLE.com's investment bankers make on this transaction?
STOCK VALUATION
Argaiv Towers has outstanding an issue of preferred stock with a par value of $100. It pays an annual dividend equal to 8 percent of par value. If the required return on Argaiv preferred stock is 6 percent, and if Argaiv pays its next dividend in one year, what is the market price of the preferred stock today?
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What is the actuarially fair price of insurance
: Suppose that every driver faces a 1% probability of an automobile accident every year. An accident will on average cost each driver $10,000. Suppose there are 2 types of individuals:those w/$60,000 in the bank and those with $5000 in the bank.
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Why the cost of the land to rand is zero
: The RAND (short for "research and development") Corporation is a think tank located on 15 prime acres of seaside property in the center of Santa Monica, California. RAND purchased the land for its offices from the city in 1952 for $250,000.
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Discuss the various ways government can handle externalities
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Find the sum of your marginal state and local tax rates
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What is the market price of the preferred stock today
: If the required return on Argaiv preferred stock is 6 percent, and if Argaiv pays its next dividend in one year, what is the market price of the preferred stock today?
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How the regulatory authority forces widget corp. to earn
: The widget Industry in Anytown is a monopoly, controlled by Widget Corp. Its demand curve for the local market is given by P = 800 - 20 W Where W represents the number of widgets sold per period. The total cost function (including opportunity or impl..
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What reflect on the vacuous action that you might take
: In the late 2010, you purchased the common stock of a company that has reported significant earnings increases in nearly every quarter since your purchase. The price of the stock increased from $12 a share at the time of the purchase to a current ..
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What would be the effect on the net present value
: what would be the effect on the net present value of the project and what would your selling price have to be to generate a net present value of $150,000 at a 15% discount rate?
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What cost would the accountant measure
: The accountant would measure revenue-explicit cost= profit The economist would measure revenue- explicit and implicit cost=profit 200-100=100 profit YES for accountant profit 200-300=-100 deficit NO for economic profit Is this all right.
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