Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
1) narrbegin: running shoes, inc.
running shoes, inc.
running shoes, inc. has 2 million shares of stock outstanding. the stock currently sells
for $12.50 per share. the firms debt is publicly traded and was recently quoted at 90%
of face value. it has a total face value of $10 million, and it is currently priced to yield
8%. the risk free rate is 2% and the market risk premium is 8%. youve estimated that
the firm has a beta of 1.20. the corporate tax rate is 40%.
narrend
what is the percentage of equity used by running shoes, inc.?
a.74.63%
b.73.53%
c.72.46%
d.68.97%
2) narrbegin: bavarian brewhouse ipo
bavarian brewhouse ipo
bavarian brewhouse is planning an ipo. under the terms of the ipo, bavarian brewhouse
will issue 8 million shares at an offer price of $25 per share. the underwriter charges an
9% underwriting fee and direct costs are estimated to be $7 million. the stock is
expected to trade at $30 at the end of the first trading day.
narrend
what are the total costs (underwriting and underpricing) of the bavarian brewhouse ipo?
a.$25 million
b.$40 million
c.$65 million
d.$80 million
3) roxy international has earnings per share of $4.05; just paid dividend $2.03 and
expects a roi next year (and the foreseeable future) of 15%. if the appropriate discount
rate is 20% what is the intrinsic value of the stock?
a.$29.020
b.$16.216
c.$17.429
d.not enough information
4) narrbegin: far corporation
far corporation
far corporation is considering a new project to manufacture widgets. the cost of the
manufacturing equipment is $150,000. the cost of shipping and installation is an
additional $15,000. the asset will fall into the 3-year macrs class. the year 1-4 macrs
percentages are 33.33%, 44.45%, 14.81%, and 7.41%, respectively. sales are expected
to be $300,000 per year. cost of goods sold will be 80% of sales. the project will require
an increase in net working capital of $15,000. at the end of three years, far plans on
ending the project and selling the manufacturing equipment for $35,000. the marginal
tax rate is 40% and far corporations appropriate discount rate is 12%.
narrend
refer to far corporation. what is the operating cash flow for year 1?
a.$55,470
b.$60,000
c.$48,798
d.$37,686
5) you are asked to choose between a 4-year investment that pays 10% compound
interest and a similar investment that pays 11.5% simple interest. which investment will
you choose?
a.the 10% compound interest investment
b.the 11.5% simple interest investment
c.you are indifferent between the investment choices
d.there is not enough information to answer the question
6) employee stock options are typically ____ when they are issued.
a.in the money
b.out of the money
c.at the money
d.for the money
7) narrbegin: competitive mesh shirts
competitive mesh shirts
competitive mesh shirts is considering a plan to ease its credit terms in order to generate
greater revenues. last year, competitive had sales of 1,000,000 units at a price and
variable cost of $20 and $15, respectively. its current average collection period is 20
days and its percentage of bad debt expense is 2% while it required return on
investment is 10%. if competitive were to ease its credit terms, the firm anticipates that
its sales would increase to 1,200,000 units without a change in price or variable costs.
however, the average collection period is expected to increase to 30 days and bad debt
expense is expected to increase to 3%.
narrend
what will be competitives cost of marginal investment in accounts receivable?
a.$1,479,452.84
b.$821,917.81
c.$65,753.50
d.there is not enough information given
8) louis international needs $100 million in new equity capital; currently shares are
trading at $40 per share. morgan steely (the investment banker) requires a 6% spread of
the offer price which will be $38 per share and is fully subsribed at that price. the fixes
costs (legal, accounting, etc.) are estimated at $250,000. how many shares must be sold
for the $100 million?
a.2,659,574
b.2,799,552
c.2,808,989
d.2,631,579
9) oogle corp. has decided to do things differently with respect to their corporate bond
issue. they have a bond outstanding that makes quarterly coupon payments instead of
semiannually. the stated coupon rate on the bond is 10% and the yield to maturity on the
5-year bond is 12%. what is the price of the bond?
a.$927.90
b.$926.40
c.$925.61
d.none of the above
10) narrbegin: bavarian brew bond
bavarian brew bond
bavarian brew is thinking about recalling $30 million of 15 year, $1,000 par value
bonds, that were issued ten years ago. the bonds carry a coupon rate of 7.8% and have a
call price of $1,110. initially the bonds generated total proceeds of $28.65 million and
the flotation costs were $500,000. bavarian brew wants to sell $30 million of 5 year,
$1,000 par value bonds with a 5.8% coupon rate to retire the old bonds. the flotation
costs on the new bond issue are estimated to be $525,000. due to having to issue the
new bonds before the old bonds can be retired the company expects a period of 3
months were they have to pay interest on the old and the new bonds. assume a tax rate
of 34%
narrend
refer to bavarian brew bond. what are the annual after tax debt payments on the new
bond?
a.$1,112,700
b.$1,148,400
c.$1,235,300
d.$1,478,900
11) the treasury department sells a zero-coupon bond that will mature in two years. the
bond has a face value of $10,000, and sold at auction for $9,400. what is the annual
return for an investor buying the bond?
a.3.00%
b.3.14%
c.6.38%
d.7.00%
