S07Assg1soln

S07Assg1soln - FIN 2200 CORPORATION FINANCE Sum 2007 1. 2....

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FIN 2200 – CORPORATION FINANCE Sum 2007 Instructors: A. Dua, 1. Firms issue securities or financial instruments (or claims) to raise capital. Give several words (or terms) used to classify these claims. 2. Indicate the five key components that comprise the balance sheet. 3. Indicate how the value of a firm is created and recognized over time. 4. Indicate the factors used in finance to determine what the value of an investment made by the firm depends on. 5. The Simple Corporation has outstanding obligations to the Complex Corporation of $250. It is year-end and the total cash flow of Simple from all sources is $325. What is the contingent payoff to the debt-holders and the equity-holders? Soln Debt holder $250, Equity holder $75 6. The Splitz Corporation has borrowed $5 million in debt with a promise to repay $5.5 million in one year. The corporation had 10 million shares outstanding worth $2 each at the time of the borrowing. Splitz earns $6 million during the year. What is the debt-holder's contingent claim; how much do the debt-holders receive; and, how much do the equity holders receive? Soln Debt holder $5.5Mil Equity Holder $500,000 7. What techniques do shareholders use as they attempt to control managerial behavior? 8. Describe the characteristics of intangible assets and provide several examples. 9. Explain what is meant by the expression “Debt is a contractual obligation.”. 10.
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S07Assg1soln - FIN 2200 CORPORATION FINANCE Sum 2007 1. 2....

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