Reference no: EM132790820

Questions -

Q1. Atlas Corp. wants to raise $2.6 million via a rights offering. The company currently has 450,000 shares of common stock outstanding that sell for $26 per share. Its underwriter has set a subscription price of $22 per share and will charge the company a spread of 7 percent.

Assume you currently own 1,200 shares of this stock and decide not to participate in the rights offering.

Required -

A. What is the ex-rights price per share?

B. What is the value of a right?

C. How much money should you receive for selling all of your rights?

Q2. Holly's is currently an all-equity firm that has 7,500 shares of stock outstanding at a market price of $40 a share. The firm has decided to leverage its operations by issuing $60,000 of debt at an interest rate of 7.6 percent. This new debt will be used to repurchase shares of the outstanding stock. The restructuring is expected to increase the earnings per share. What is the minimum level of earnings before interest and taxes that the firm is expecting?

Q3. The market value balance sheet for XP Corp. reflects cash of $42,000, fixed assets of $319,000, and equity of $237,000. There are 8,000 shares of stock outstanding with a par value of $1 per share. The company has declared a dividend of $1 per share. The stock goes ex dividend tomorrow. Ignore any tax effects. What will be the price of the stock tomorrow morning?

Q4. CT provides services exclusively for three customers. The monthly amounts paid by these customers along with their respective collection delays are: $81,900 with 2 days, $47,300 with 2.5 days, and $68,400 with 3 days. Given this information, what is the weighted average delay?

Q5. The Dilana Corporation is considering a change in its cash-only policy. The new terms would be net one period. The required return is 1.5 percent per period. The firm has current sales of 4,500 units per month at a price of $70 per unit. The new policy is expected to increase sales to 4,550 units at a price of $70 per unit. The cost per unit is constant at $38. What is the incremental cash inflow of the new policy?

Q6. Assume $1 is currently equal to A$1.3 in the spot market. Also assume the expected inflation rate in Australia is 2.8 percent as compared to 2.4 percent in the U.S. What is the expected exchange rate one year from now if relative purchasing power parity exists?