FIN-516 WEEK 3 HOMEWORK ANSWER KEY
OPTION PROBLEM NO. 1
Exercise Value: Current Stock Price Strike Price
Exercise Value: $36 - $30 = $6
Time Value = Option Price Exercise Value
Time Value = $9 - $ 6 = $3
OPTION PROBLEM NO. 2
Time Value = Market Price of t
FIN-516 WEEK 2 MINI CASE ASSIGNMENT
(This should be posted in Document Sharing)
Select a major industrial or commercial company based in the United States, and listed
on one of the major stock exchanges in the United States. Each student should select a
d
Problem 16-8
As in Problem 1, Gladstone Corporation is about to launch a new product. Depending on
next year: $150 million, $135 million, $95 million, and $80 million. These outcomes are
interest rate is 5%, and that in the event of default, 25% of the va
(a) What is the present value of the 5 million cash infow computed by frst discountng the euro and then convertng it into
In view of the stated terms, the present value of the 5 million cash inflow is
5,841,121.50 or
Euro Cash Flows / ( 1 + Discount Rate
Problem 20-6
You own a call option on Intuit stock with a strike price of $40. The option will expire
inexactly 3 months time.
a. If the stock is trading at $55 in 3 months, what will be the payoff of the call?
Bought a call option
Strike Price
Spot price
Fin-516 Week 6 Quiz
1.
Question :
(TCO D) Which of the following factors would increase the likelihood
that a company would call its outstanding bonds at this time?
(a) The yield to maturity on the company's outstanding bonds
increases due to a weakening
a) How many shares must the venture capitalist receive to end up with 20% of the company?
What is the implied price per share of this funding round?
The venture capitalist wants to own 20%, therefore
the founders 8 million shares must account for 80% of t
(a)What are the free cash flow consequences of buying the fabricator if the lease is a true tax lease?
Year
Capital expeditures
Depreciation tax sheild at 35%
Free cash flow (buy)
0
(756000)
(756000)
1
2
3
4
5
6
37800
37800
37800
37800
37800
37800
37800
3
FN516 Week 4 Homework Solutions INSTRUCTOR ONLY
23-3.
Starware Software was founded last year to develop software for gaming applications. Initially, the
founder invested $800,000 and received 8 million shares of stock. Starware now needs to raise a
secon
FN516 Week 2 Homework Solutions INSTRUCTOR ONLY
14-11.
Consider the entrepreneur described in Section 14.1 (and referenced in Tables 14.114.3). Suppose
she funds the project by borrowing $750 rather than $500.
a.
AcordingtMPpsoI,whatievluofqty?Whareiscflo
FN516 Week 3 Homework Solutions INSTRUCTOR ONLY
20-6.
You own a call option on Intuit stock with a strike price of $40. The option will expire in exactly three
months time.
a.
Ifthesockiradngt$5hemos,watilbehpyoftcal?
b.
Ifthesockiradngt$35ehmos,watilbehp
FN516 Week 1 Homework Solutions INSTRUCTOR ONLY
17-7.
Natsam Corporation has $250 million of excess cash. The firm has no debt and 500 million shares
outstanding, with a current market price of $15 per share. Natsams board has decided to pay out
this cash
FIN 516 Week 8 Final Exam
Question 1.1. (TCO B) Which of the following statements concerning the MM
extension with growth is not correct?
(a) The tax shields should be discounted at the unlevered cost of equity.
(b) The value of a growing tax shield is gr
FIN 516 Full Course
FIN 516 Week 1 Homework
FIN 516 Week 2 Homework
FIN 516 Week 3 Homework
FIN 516 Week 4 Homework
FIN 516 Week 5 Homework
FIN 516 Week 6 Homework
FIN 516 Week 7 Homework
FIN516 WEEK 2 MINI CASE ASSIGNMENT (3 Different Papers)
FIN516 WEEK
FIN 516 WEEK 2 MINI CASE ASSIGNMENT
(3 Different Papers Included)
FIN516 WEEK 2 MINI CASE ASSIGNMENT- Ford Motors
FIN516 WEEK 2 MINI CASE ASSIGNMENT -General Electric
FIN516 WEEK 2 MINI CASE ASSIGNMENT -Microsoft Corporation
Select a major industrial or c
FIN516 WEEK 4 - HOMEWORK
Problem 23-3 on Implied Price of Funding Based on Chapter 23
Starware Software was founded last year to develop software for gaming applications.
Initially, the founder invested $800,000 and received 8 million shares of stock. Sta
Assume that the Tennessee Valley Power Authority (which is exempt from income taxes) issued
$100,000 of 30-year maturity, 10 percent coupon, semiannual payment, tax-exempt bonds on January
1, 1997. The bonds were callable after 10 years, or after January
FIN 516 Week 6 Homework
Problem 28-9 on Acquisition Analysis Based on Chapter 28 Mergers and Acquisitions
(Excel file included)
Your company has earnings per share of $4. It has 1 million shares outstanding, each of which has a price of $40.
You are think
FIN 516 Week 7 Homework
Problem 31-1 on Exchange Rates Based on Chapter 31 International Corporate Finance
(Excel file included)
You are a U.S. investor who is trying to calculate the present value of a 5 million cash inflow that will occur 1 year in
the
FIN 516 Week 5 Homework
Problem 25-6 on Purchase Versus Lease Based on Chapter 25
Craxton Engineering will either purchase or lease a new $756,000 fabricator. If
purchased, the fabricator will be depreciated on a straight-line basis over 7 years.
Craxton
FIN516 WEEK 1 - HOMEWORK
FIN 516 Week 1 Homework
Problem 17-7 on Ex-dividend Price Based on Chapter 17 Payout Policy
Natsam Corporation has $250 million of excess cash. The firm has no debt and 500 million shares outstanding with a current
market price of
FIN 516 Week 4 Homework
Problem 23-3 on Implied Price of Funding Based on Chapter 23
Starware Software was founded last year to develop software for gaming applications. Initially, the founder invested
$800,000 and received 8 million shares of stock. Star
FIN 516 Week 2 Homework
Problem 14-11 Based on Chapter 14: WACC and Modigiani & Miller Extension
Models With Growth Assumptions
Consider the entrepreneur described in Section 14.1 (and referenced in Tables 14.1
14.3). Suppose she funds the project by borr
FIN 516 Week 3 Homework
Problem 20-6 on Call Options Based on Chapter 20
(Excel file included)
You own a call option on Intuit stock with a strike price of $40. The option will expire in
exactly 3 months time.
a) If the stock is trading at $55 in 3 months
FIN516 WEEK 7 - HOMEWORK
Problem 31-1 on Exchange Rates based on Chapter 31 International Corporate Finance
(Excel file included)
You are a U.S. investor who is trying to calculate the present value of a 5 million cash inflow
that will occur 1 year in the
FIN516 WEEK 3 - HOMEWORK
Problem 30-14 on Swaps Based on Chapter 30
Your firm needs to raise $100 million in funds. You can borrow short-term at a spread of
1% over LIBOR. Alternatively, you can issue 10-year, fixed-rate bonds at a spread of
2.50% over 10
4/11/2010
Chapter 14. Tool Kit for Distributions to Shareholders: Dividends and Repurchases
PROCEDURES FOR CASH DISTRIBUTIONS (Section 14.2)
Declaration date: Thursday, November 11, 2010
Dividend goes with stock: Tuesday, December 07, 2010
Ex-dividend dat