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Given the results of Problem 19.6, suppose that the merged firm has 1000 shares outstanding.
Furthermore, suppose that the shareholders decide to issue $1000 of new debt (which is not subordinate to outstanding debt), maturing in four years, and invest the proceeds in marketable securities, so that the new value of the merged firm is $5000.
What will be the new price per share? Assume the merged firms instantaneous variance is unchanged by this investment.
You are considering purchasing an apartment building for 1.2 million dollars. You expect the yearly cash inflows for the first three years to be $175,000 and year 4 and 5 will be $200000 and 250,000 respectively. At hte end of year 5 you sell the bui..
It is well known that Investors generally do not like to bear risk. For two otherwise identical corporate bonds, the one with more idiosyncratic risk should have a price that is lower or the same?
London purchased a piece of real estate last year for $82,300. The real estate is now worth $102,000. If London needs to have a total return of 0.22 during the year, then what is the dollar amount of income that she needed to have to reach her object..
A 15-year, 14% semiannual coupon bond with a par value of $1,000 may be called in 4 years at a call price of $1,075. The bond sells for $1,050. (Assume that the bond has just been issued.) What is the bond's yield to maturity? What is the bond's curr..
Gateway Communications is considering a project with an initial fixed asset cost of $2.46 million which will be depreciated straight-line to a zero book value over the 10-year life of the project. At the end of the project the equipment is scrapped. ..
A convertible bond has the following features (rounding allowed in answers): The bond may be converted into how many shares? What is the current value of the convertible as a bond if prevailing interest rates are 6% (n=10)? What is the current value ..
What are the arithmetic and geometric average returns for a stock with annual returns of 8 percent, 9 percent, –7 percent, and 16 percent? List the arithmetic answer first.
Daily settlement (marked the market) of the futures contract
Beckett, Inc., has no debt outstanding and a total market value of $200,000. Earnings before interest and taxes, EBIT, are projected to be $24,000 if economic conditions are normal. If there is strong expansion in the economy, then EBIT will be 15 pe..
Suppose your portfolio mirrors S&P500 index and is valued currently at $2,000,000. The S&P 500 index is currently at 2,000. What action is needed to provide protection against the value of the portfolio falling below $1,900,000 in 6 months?
Which is the largest expense for each company in the most recent year? What is its dollar amount? Is it logical that this would be the largest expense given the nature of each company's business? Explain your answer.
For this discussion, consider the dilemmas hospitals face in treating the uninsured. Consider the following questions and post your response: How much should hospitals charge the uninsured for services provided? How aggressive should they be in pursu..
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