What is the co-alignment principle?
Dilution effect of stock issue Raggio, INc has 100,000 shares of stock outstanding. Each share is worth $80.00, so the company's market value of equity is $8,000,000. Suppose the firm issues 20,000 new shares at the following prices: $80, $75, and $65. What will the effect be of each of...
The St. Anger Corporation needs to raise $35 million to finance its expansion into new markets. The company will sell new shares of equity via a general cash offering to raise the needed funds. If the offer price is $31 per share and the company's underwriters charge an 8 percent spread, how...
Corporate Bonds 13-1 The initial proceeds per bond, the size of the issue, the initial maturity of the bond, and the years remaining to maturity are shown in the following table for a number of bonds. In each case, the firm is in the 40 percent tax bracket, and the bond has a $1,000 par...
Ram electric company is being considered for acquisition by Cavalier electric. Cavalier expects the combination to increase the cash flows by $100,000 for each of the next 5 years and by $125,000 for each of the following 5 years. Ram electric has relatively high financial leverage; Cavalier...
Jeff erson Products, Inc., is considering purchasing a new automatic press brake, which costs $300,000 including installation and shipping. Th e machine is expected to generate net cash infl ows of $80,000 per year for 10 years. At the end of 10 years, the book value of the machine will be $0,...
Bullock Inc's sales were $500,000 during 2005, and its year-end assets were $750,000. For 2006, sales are expected to grow by 30%, and since Bullock is operating at full capacity, its assets must grow in proportion to sales. Its 2005 current liabilities consisted of $40,000 of accounts...
A repurchase agreement calls for an investor to buy securities for $4,925,000 and sell them back in 60 days for $5,000,000. What is the yield?
Page 2 of 3 One year ago, your company purchased a machine for $110,000. You have learned that a new machine is available that offers many advantages; you can purchase this new machine for $150,000 today. It will be depreciated on a straight-line basis over ten years and has a salvage value of...
Sound cash management techniques would support __________. (a) minimizing collection float, maximizing disbursement float, and minimizing the cash conversion cycle (b) minimizing collection float, maximizing disbursement float, and minimizing the cash turnover (c) maximizing...
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1. Can you help me with this valuation problem?: Imagine that you are trying to evaluate the economics of purchasing an automobile. You expect the car to provide annual after-tax cash benefits of $1,200 at the end of each year and assume that you can sell the car for after-tax proceeds of $5,000 at the end of the planned 5-year ownership period. All funds for purchasing the car will be drawn from your savings, which are currently earning 6% after taxes.
- a.Identify the cash flows, their timing, and the required return applicable to valuing the car.
- b.What is the maximum price you would be willing to pay to acquire the car? Explain.
2. How do you calculate the before tax-cost of the Sony bond and the after-tax cost of the Sony bond given the following information?:
- David Abbot is interested in purchasing a bond issued by Sony. He has obtained the following information on the security:
- Sony bond
- Par value $1,000 Coupon interest rate 6% Tax bracket 20%
- Cost $930 Years to maturity 10