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W01 - Ryerson Polytechnic University FIN401 Managerial...

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Ryerson Polytechnic University FIN401 Managerial Finance Final Exam Winter 2001 Please circle your instructor’s name: Alan Kaplan Anne Inglis Student Name _________________________________ (Please Print) Student Number _________________________________ Notes: Answer all questions in the space provided or on the scanner sheet. This is an open book exam. You must show all work for the problems to receive full credit. State any assumptions you feel are necessary. There are 3 hours in this exam. Marks: Available Multiple Choice: 50 _________ Problem #1 8 _________ Problem #2 12 _________ Problem #3 12 _________ Problem #4 4 _________ Problem #5 14 _________ Total 100 _________ There are 9 pages in this exam.
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FIN401: Managerial Finance, Winter 2001 Problem #1 (8 marks or 14 minutes) Jellconni Corp. is an all equity company with 500,000 common shares outstanding. The share price is $22 per share currently. The firm has $1,000,000 in cash on the market value balance sheet. The rest of the market value balance sheet is composed of long-term assets. The firm is thinking of doing one of three things. Either the firm will just keep going as is, or it will declare a $1 dividend tomorrow, or it will repurchase shares with the money that it would have used to pay the dividend. Repurchased shares can be bought for the current market price. Assume that there are no market imperfections such as taxes, transactions costs, etc. Jenni currently owns 400 shares of Jellconni Corp. Show that she is indifferent (i.e., doesn’t care) which of the alternatives Jellconni chooses. Assume that if Jellconni
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