The price of Ervin Corp. stock will be either $74 or $96 at the end of the year. Call
options are available with one year to expiration. T-bills currently yield 5 percent.
a. Suppose the current price of Ervin stock is $80. What is the value of the call o
BETHESDA M
~ 5,000 acres of land purchased 10 years ago for 5 million (Current after tax basis is 5.5 million)
~ Delivery of 500,000 tons of coal per year for $82 per ton
~ Production for the next 4 years (In ton):
Year 1
620,000
~ Excess sold in spot mar
Cavo Corporation expects an EBIT of $19,750 every year forever.
The company currently has no debt, and its cost of equity is 15 percent.
a. What is the current value of the company?
b. Suppose the company can borrow at 10 percent. If the corporate tax rat
Rolston Corporation is comparing two different capital structures, an all-equity plan (Plan
I) and a levered plan (Plan II). Under Plan I, Rolston would have 265,000 shares of stock
outstanding. Under Plan II, there would be 185,000 shares of stock outsta
The Metallica Heavy Metal Mining (MHMM) Corporation wants to diversify its
operations. Some recent financial information for the company is shown here:
Stock price .
$75
Number of shares .
65,000
Total assets .
$9,400,000
Total liabilities .
$4,100,000
Ne
Stackhouse Industries has a new project available that requires an initial investment of
$4.5 million. The project will provide unlevered cash flows of $675,000 per year for the
next 20 years. The company will finance the project with a debt-to-value rati
What does it mean when a company's return on assets (ROA) is equal to return on
equity (ROE)? What implications does it carry?
First of all, ROA helps us determine the profitability of the assets of a company, when it comes
to generating revenue. ROA is N
Overnight Publishing Company (OPC) has $2.5 million in excess cash. The firm plans to
use this cash either to retire all of its outstanding debt or to repurchase equity. The firms
debt is held by one institution that is willing to sell it back to OPC for
McKENZIE CORPORATION'S CAPITAL BUDGET
GIVEN
McKenzie currently has a bond issue outstanding with a face value of
This restriction means that the expansion will ben entirely financed with equity at a
Economic
Growth
Probability
Low
Normal
High
0.30
0.50
0.
Monica Ghaly
University of the District Of Columbia
Professor: Jay Taparia
May/ 2014
Table Of Content
Executive Summary
Company Overview
Company Key Risk Factors
Company Growth Strategy
Summary Cash Flow Statement (Past 3 Years Table )
Summary Income Stat
Chapter 9 test
-The term proxy fight refers to a situation where one division of a firm attempts to take over operations currently under the control of
another division. False
-The preemptive right is the right of current stockholders to buy new shares in
Chapter 7 test
-Bonds are long-term debt obligations issued by corporations, the federal government, and state and local governments. Foreign
entities can also issue bonds in the U.S. to raise capital. True
-The interest paid on a municipal bond, otherwis
Bonds are long-term debt obligations issued by corporations, the federal government, and
state and local governments. Foreign entities can also issue bonds in the U.S. to raise
capital. True or false?
True
False
status: correct (1.0)
correct: true
your an
Bond A long-term debt instrument.
Call Provision A provision in a bond contract that gives the issuer the right to redeem the bonds
under specified terms prior to the normal maturity date.
Convertible Bond A bond that is exchangeable at the option of the
Determinants of Market Interest Rates
Business Finance - Chapter 6 notes from 3/5/12
I Quoted interest rates is equal to r.
The rate of interest on a security that is free of all risk; rRF is proxied by the T-bill rate or the Tbond rate. RRF includes an i
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Chapt er 6. Int erest Rat es
Interest rates can easily be observed. All it requires is reading the newspaper, watching television,
or surfing the internet. However, it is not so easy to see the factor
Chapter 9
Actual (Realized)
Rate of Return,
The rate of return on a common stock actually received by stockholders in some past period.
greater or less than
s
Capital Gains
Yield
Classified Stock
Constant Growth
(Gordon) Model
s
s
may be
or rs.
The capita
Chapter 8
Average Stock's Beta, bA
By definition, bA = 1 because an average-risk stock is one that
tends to move up and down in step with the general market.
Beta Coefficient, b
A metric that shows the extent to which a given stock's returns move up
and d
Chapter 7 key terms
Bond
A long-term debt instrument.
Call Provision
A provision in a bond contract that gives the issuer the right to redeem the bonds under specified
terms prior to the normal maturity date.
Convertible Bond A bond that is exchangeable a
Model for Chapter 11, Basics of Capital Budgeting
12/12/08
On tab #1 we go through the main calculations done in the chapter. We recommend that you see our Excel
Tutorial if you don't understand some of the Excel functions.
Table 11-1. Data on Projects S
09 Chapter model
12/12/08
Chapter 9. Stocks and Their Valuation
This model is similar to the bond valuation models developed in Chapter 7 in that we employ discounted cash flow analysis to find the value of a firm's stock.
COMMON STOCK VALUATION (Section
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Chapter 8. Risk and Rates of Return
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The higher a security's risk, the higher its required return. Risk can be thought of in two ways: (1) Stand-alone risk, where the security is considered in isolation, and (2) portfolio risk,
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Chapter 7. Bonds and Their Valuation
The value of any financial asset is the present value of the asset's expected future cash flows. The key
inputs are (1) the expected cash flows and (2) the approp
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Chapter 6. Interest Rates
THE DETERMINANTS OF INTEREST RATES (Section 6-3)
Interest rates can easily be observed. All it requires is reading the newspaper, watching television, or surfing the internet. H
12-10-08
05 Chapt er model
Chapter 5. The Time Value of Money
This model is STRICTLY OPTIONAL. Neither students nor instructors need to go through it. However, if
someone wants to practice with Excel, then the model can be useful. Also, on the tabs we sho
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Chapter 4. Analysis of Financial Statements
5
This model is STRICTLY OPTIONAL. Neither students nor instructors need to go through it. However,
if someone wants to practice with Excel, then the model can
03 Chapter model
12/10/08
Chapter 3. Financial Statements, Cash Flows, and Taxes
This model is STRICTLY OPTIONAL. Neither students nor instructors need to go through it. However,
if someone wants to practice with Excel, then the model can be useful. Also,