HOW A NEW ENGINEERING GRADUATE CAN HELP HIS FATHER 1
I dont know whether to sell it, expand it, lease it, or what. But I dont think we can keep doing
the same thing for many more years. What I really want to do is to keep it for 5 more years, t
Fisk Corporation is trying to improve its inventory control system and has installed an
online computer at its retail stores. Fisk anticipates sales of 49,000 units per year, an
ordering cost of $8 per order, and carrying costs of $1.60 per uni
Logan Distributing Company of Atlanta sells fans and heaters to retail outlets throughout the
Southeast. Joe Logan, the president of the company, is thinking about changing the firms credit
policy to attract customers away from competitors. The
National Health Corporation (NHC) has a cumulative preferred stock issue outstanding,
which has a stated annual dividend of $8 per share. The company has been losing money
and has not paid preferred dividends for the last five years. There are
Lear Inc. has $840,000 in current assets, $370,000 of which are considered permanent
current assets. In addition, the firm has $640,000 invested in fixed assets.
a. Lear wishes to finance all fixed assets and half of its permanent current asset
Oral Roberts Dental Supplies has annual sales of $5,200,000. Ninety percent are on credit.
The firm has $559,000 in accounts receivable. Compute the value of the average
Oral Roberts Dental Supplies
Antivirus Inc. expects its sales next year to be $2,500,000. Inventory and accounts
receivable will increase $480,000 to accommodate this sales level. The company has a
steady profit margin of 15 percent with a 35 percent dividend payout. How m
C. D. Rom has just given an insurance company $35,000. In return, he will receive an
annuity of $3,700 for 20 years.
At what rate of return must the insurance company invest this $35,000 in order to make
the annual payments? Interpolate.
Biochemical Corp. requires $550,000 in financing over the next three years. The firm can
borrow the funds for three years at 10.60 percent interest per year. The CEO decides to do
a forecast and predicts that if she utilizes short-term financin
Your father offers you a choice of $105,000 in 12 years or $47,000 today.
a. If money is discounted at 8 percent, which should you choose?
b. If money is still discounted at 8 percent, but your choice is between $105,000 in 9 years
or $47,000 t
Franklin Templeton has just invested $9,260 for his son (age one). This money will be
used for his sons education 18 years from now. He calculates that he will need $71,231 by
the time the boy goes to school. What rate of return will Mr. Temple
Walker Machine Tools has 5.5 million shares of common stock outstanding. The current
market price of Walker common stock is $52 per share rights-on. The companys net
income this year is $17.5 million. A rights offering has been announced in whi
Rust Pipe Co. was established in 1994. Four years later, the company went public. At that
time, Robert Rust, the original owner, decided to establish two classes of stock. The first
represents Class A founders stock and is entitled to nine vote
Mr. Meyers wishes to know how many shares are necessary to elect 5 directors out of 14
directors up for election in the Austin Power Company. There are 150,000 shares
outstanding. (Use Formula 17-1 to determine the answer.)
Midland Petroleum is holding a stockholders meeting next month. Ms. Ramsey is the
president of the company and has the support of the existing board of directors. All 12
members of the board are up for reelection. Mr. Clark is a dissident stock
Mr. and Mrs. Anderson own two shares of Magic Tricks Corporations common stock. The
market value of the stock is $58. The Andersons also have $46 in cash. They have just
received word of a rights offering. One new share of stock can be purchase
Todd Winningham IV has $4,800 to invest. He has been looking at Gallagher Tennis Clubs
Inc. common stock. Gallagher has issued a rights offering to its common stockholders. Six
rights plus $48 cash will buy one new share. Gallaghers stock is se
Computer Graphics has announced a rights offering for its shareholders. Carol Stevens
owns 1,400 shares of Computer Graphics stock. Four rights plus $54 cash are needed to
buy one of the new shares. The stock is currently selling for $66 rights
Boles Bottling Co. has issued rights to its shareholders. The subscription price is $45 and
four rights are needed along with the subscription price to buy one of the new shares. The
stock is selling for $55 rights-on.
a. What would be the valu
The Omega Corporation has some excess cash it would like to invest in marketable
securities for a long-term hold. Its vice-president of finance is considering three
investments (Omega Corporation is in a 35 percent tax bracket and the tax rate
Time Watch Co. has $46 million in earnings and is considering paying $6.45 million in
interest to bondholders and $4.35 million to preferred stockholders in dividends.
a. What are the bondholders contractual claims to payment?
b. What are the p
Carl Hubbell owns 6,001 shares of the Piston Corp. There are 12 seats on the company
board of directors, and the company has a total of 78,000 shares of stock outstanding. The
Piston Corp. utilizes cumulative voting. Can Mr. Hubbell elect himse
Mr. Michaels controls proxies for 40,000 of the 75,000 outstanding shares of Northern
Airlines. Mr. Baker heads a dissident group that controls the remaining 35,000 shares. There
are seven board members to be elected and cumulative voting rules
The Beasley Corporation has been experiencing declining earnings, but has just
announced a 50 percent salary increase for its top executives. A dissident group of
stockholders wants to oust the existing board of directors. There are currently 1
Betsy Ross owns 927 shares in the Hanson Fabrics Company. There are 15 directors to be
elected. Thirty-three thousand five hundred shares are outstanding. The firm has adopted
a. How many total votes can be cast?
b. How many
Why might management use a poison pill strategy?
A poison pill may help management defend itself against a potential takeover attempt.
When another company attempts to acquire the firm, the poison pill allows current
stockholders to ac
During a rights offering, the underlying stock is said to sell rights-on and
ex-rights. Explain the meaning of these terms and their significance to current
stockholders and potential stockholders.
When a rights offering is announced,
What is the most likely explanation for the use of preferred stock from a corporate
Most corporations that issue preferred stock do so to achieve a balance in their capital
structure. It is a means of expanding the capital b
A small amount of preferred stock is participating. What would your reaction be if
someone said common stock is also participating?
The participation privileges of a few preferred stock issues mean that preferred
stockholders may recei
Put an X by the security that has the feature best related to the following considerations.
a. Ownership and control of the firm
b. Obligation to provide return
c. Claims to assets in bankruptcy
d. High cost of distribution
e. Highest return