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Finance
Wansley Portal Inc., a large Internet service provider, is evaluating the possible acquisition of Alabama Connections Company (ACC), a regional Internet service provider. Wansley's analysts project
Mark Collins, luthier and businessman, builds and sells custom-made acoustic and electric stringed instruments. Although located in Maryville, Tennessee, he purchases raw materials from around the
At today's spot exchange rates 1 U.S. dollar can be exchanged for 9 Mexican pesos or for 111.23 Japanese yen. You have pesos that you would like to exchange for yen. What is the cross rate between
In 1983, the Japanese yen-U.S. dollar exchange rate was 245 yen per dollar, and the dollar cost of a compact Japanese-manufactured car was $8,000. Suppose that now the exchange rate is 80 yen per
Chapman Inc.'s Mexican subsidiary, V. Gomez Corporation, is expected to pay to Chapman 50 pesos in dividends in 1 year after all foreign and U.S. taxes have been subtracted. The exchange rate in 1
The South Korean multinational manufacturing firm, Nam Sung Industries, is debating whether to invest in a 2-year project in the United States. The project's expected dollar cash flows consist of an
The nominal yield on 6-month T-bills is 7%, while default-free Japanese bonds that mature in 6 months have a nominal rate of 5.5%. In the spot exchange market, 1 yen equals $0.009. If interest rate
A computer costs $500 in the United States. The same model costs 550 euros in France. If purchasing power parity holds, what is the spot exchange rate between the euro and the dollar?
Suppose that the exchange rate is 0.60 dollars per Swiss franc. If the franc appreciates 10% against the dollar, how many francs would a dollar buy tomorrow?
Your Boston-headquartered manufacturing company, Wruck Enterprises, obtained a 50 million-peso loan from a Mexico City bank last month to fund the expansion of your Monterrey, Mexico plant. When you
Currently you have $50,000 that you would like to invest for 2 years and are considering buying a government security maturing in 1 year that pays 3% annually. If you do this, you will also have to
Compare and explain the historical rates of return for different types of securities?
It has been said that in recent years the difference between an organized exchange and the over-the-counter market has blurred. What does this statement mean and do you think it is correct?
Below are the financial statements for two firms, Time Warner and Walt Disney, for 2012 and 2013.a. How did Time Warner's profit margins change from 2012 to 2013? To what would you attribute the
Given the following information, prepare a statement of cash flows.Dividends ........................................... $25Increase in common stock .......................... 27Increase in accounts
Prepare a statement of cash flows for Abrahams Manufacturing Company for the year ended December 31, 2015. Interpret your results.Abrahams Manufacturing Company Balance Sheet for 12/31/2014 and
Given the information below for Pamplin Inc.,:a. How much is the firm's net working capital, and what is the debt ratio for 2014 and 2015?b. Complete a common-sized income statement, a common-sized
Based on the information for the T. P. JarmonCompany for the year ended December 31, 2015 (see page 96):a. How much is the firm's net working capital, and what is the debt ratio?b. Complete a
Prepare an income statement and a balance sheet from the following scrambled list of items. What is the firm's net working capital and debt ratio?Sales
What are the limitations of financial statements?
Aylward, Inc. currently has $2,145,000 in current assets and $858,000 in current liabilities. The company's managers want to increase the firm's inventory, which will be financed by a short-term note
The T. P. Jarmon Company manufactures and sells a line of exclusive sportswear. The firm's sales were $600,000 for the year just ended, and its total assets exceeded $400,000. The company was started
Artz, Inc.'s financial statements for 2015 are shown below:Sales ........................................................ $ 4,500Cost of goods sold ........................................
Use the information from the balance sheet and income statement below to calculate the following ratios:Current ratio ................................ Days in receivablesAcid-test ratio
The Malia Corporation had sales in 2015 of $65 million, total assets of $42 million, and total liabilities of $20 million. The interest rate on the company's debt is 6 percent, and its tax rate is 30
Last year, Stevens, Inc. had sales of $400,000 with a cost of goods sold of $112,000. The firm's operating expenses were $130,000, and its increase in retained earnings was $58,000. There are
The balance sheet and income statement for the A. Thiel Mfg. Company are as follows:Balance Sheet ($000)Cash ........................................... $ 500Accounts receivable
The D. A. Winston Corporation earned an operating profit margin of 10 percent based on sales of $10 million and total assets of $5 million last year.a. What was Winston's total asset turnover
The Tabor Sales Company had a gross profit margin (gross profits ¸ sales) of 30 percent and sales of $9 million last year. Seventy-five percent of the firm's sales are on credit, and the remainder
K. Johnson, Inc.'s managers want to evaluate the firm's prior-year performance in terms of its contribution to shareholder value. This past year, the firm earned an operating return on investment of
Garret Industries has a price/earnings ratio of 16.29X. a. If Garret's earnings per share are $1.35, what is the price per share of Garret's stock? b. Using the price per share you found in part (a),
Emma's Electronics Incorporated has total assets of $63 million and total debt of $42 million. The company also has operating profits of $21 million with interest expenses of $6 million. a. What is
Drew Concrete uses Economic Value Added as a financial performance measure. Drew has $240 million in assets, and the firm has financed its assets with 37 percent equity and 63 percent debt with an
Chang, Inc.'s balance sheet shows a stockholders' equity-book value (total common equity) of $750,500. The firm's earnings per share is $3, resulting in a price / earnings ratio of 12.25X. There are
The Allen Marble Company has a target current ratio of 2.0 but has experienced some difficulties financing its expanding sales in the past few months. At present, the firm has current assets of $2.5
The financial statements and industry norms are shown below for Pamplin, Inc.:a. Compute the financial ratios for Pamplin for 2014 and for 2015 to compare both against the industry norms.b. How
After graduating from college in December 2014, Elizabeth Arce started her career at the W&T Corporation, a small- to medium-sized warehouse distributor in Nashville, Tennessee. The company was
You lend a friend $30,000, which your friend will repay in five equal annual end-of-year payments of $10,000, with the first payment to be received 1 year from now. What rate of return does your loan
Should we have bet the kids' college fund at the dog track? Let's look at one specific case of a college professor (let's call him Prof. ME) with two young children. Two years ago, Prof. ME invested
You've just received an offer from a bank for a credit card with a quoted rate, or APR, of 18 percent compounded monthly. What's the EAR, or effective annual rate, on the credit card?
You are offered $1,000 today, $10,000 in 12 years, or $25,000 in 25 years. Assuming that you can earn 11 percent on your money, which offer should you choose?
Jesse Pinkman is thinking about trading cars. He estimates he will still have to borrow $25,000 to pay for his new car. How large will Jesse's monthly car loan payment be if he can get a 5-year (60
Hank Schrader plans to invest $1,000 at the end of each quarter for 4 years into an account with an APR of 6.4 percent compounded quarterly. He will use this money as a down payment on a new home at
You're in need of some money fast, and rather than ask your folks for help, you've decided to look into a payday loan. At a payday loan shop right near your school you see that you can borrow $100
In 2016 Bill Gates was worth about $82 billion. Let's see what Bill Gates can do with his money in the following problems.a. I'll take Manhattan? Manhattan's native tribe sold Manhattan Island to
Giancarlo Stanton hit 37 home runs in 2014. If his home-run output grew at a rate of 12 percent per year, what would it have been over the following 5 years?
The following are the end-of-month prices for both the Standard & Poor's 500 Index and Nike's common stock.a. Using the data here, calculate the holding-period returns for each of the monthsb.
Using the CAPM, estimate the appropriate required rate of return for the three stocks listed here, given that the risk-free rate is 5 percent and the expected return for the market is 12
Although not absolutely necessary, you are advised to use a computer spreadsheet to work the following problem.a. Use the price data from the table that follows for the Standard & Poor's 500 Index,
Below you have been provided the prices for Citigroup and the S&P 500 Index.a. Calculate the monthly holding-period returns for Citigroup and the S&P 500 Index.b. What are the average monthly returns
Bellingham bonds have an annual coupon rate of 8 percent and a par value of $1,000 and will mature in 20 years. If you require a return of 7 percent, what price would you be willing to pay for the
You own a bond that pays $70 in annual interest, with a $1,000 par value. It matures in 15 years. Your required rate of return is 7 percent.a. Calculate the value of the bond.b. How does the value
Kyser Public Utilities issued a bond with a $1,000 par value that pays $30 in annual interest. It matures in 20 years. Your required rate of return is 4 percent.a. Calculate the value of the bond.b.
Sakara Co. bonds are selling in the market for $1,045. These 15-year bonds pay 7 percent interest annually on a $1,000 par value. If they are purchased at the market price, what is the expected rate
Flora Co.'s bonds, maturing in 7 years, pay 4 percent interest on a $1,000 face value. However, interest is paid semiannually. If your required rate of return is 5 percent, what is the value of the
An 8-year bond for Rusk Corporation has a market price of $700 and a par value of $1,000. If the bond has an annual interest rate of 6 percent, but pays interest semiannually, what is the bond's
Hamilton, Inc. bonds have a 6 percent coupon rate. The interest is paid semiannually, and the bonds mature in 8 years. Their par value is $1,000. If your required rate of return is 4 percent, what
Mason, Inc. has two bond issues outstanding, called Series A and Series B both paying the same annual interest of $55. Series A has a maturity of 12years, whereas Series B has a maturity of 1
Define the expected rate of return to bondholders.
a. How does a bond's par value differ from its market value? b. Explain the differences among a bond's coupon interest rate, current yield, and required rate of return.
What factors determine a bond's rating? Why is the rating important to the firm's manager?
Explain the relationship between the required rate of return and the value of a security.
You intend to purchase Dorchester common stock at $50 per share, hold it for 1 year, and then sell it after a dividend of $6 is paid. How much will the stock price have to appreciate for you to
Herrera Motor, Inc. paid a $3.50 dividend last year. At a constant growth rate of 5 percent, what is the value of the common stock if the investors require a 20 percent rate of return?
Sanford's common stock is expected to pay $1.85 in dividends next year, and the market price is projected to be $42.50 per share by yearend. If investors require a rate of return of 11 percent, what
The preferred stock of the Gandt Corporation pays a $2.75 dividend. What is the value of the stock if your required return is 9 percent?
You own 200 shares of Shapard Resources' preferred stock, which currently sells for $40 per share and pays annual dividends of $3.40 per share.a. What is your expected return?b. If you require an 8
You own 150 shares of Budd Corporation's preferred stock at a market price of $22 per share. Budd pays dividends of $1.55. What is your expected rate of return? If you have a required rate of return
You are considering the purchase of Kline, Inc.'s stock at a market price of $36.72 per share. Assume the stock pays an annual dividend of $2.33. What would be your expected return? Should you
Alyward & Bram's common stock currently sells for $23 per share. The company's executives anticipate a constant growth rate of 10.5 percent and an end-of-year dividend of $2.50.a. What is your
Bennett, Inc.'s common stock currently sells for $22.50 per share. The company's executives anticipate a constant growth rate of 10 percent and an end-of-year dividend of $2.a. What is your expected
The common stock of Martin Co. is selling for $32.84 per share. The stock recently paid dividends of $2.94 per share and has a projected constant growth rate of 9.5 percent. If you purchase the
The market price for the Earnest Corporation's common stock is $43 per share. The price at the end of 1 year is expected to be $48, and dividends for next year should be $2.84. What is the expected
Ziercher executives anticipate a growth rate of 12 percent for the company's common stock. The stock is currently selling for $42.65 per share and pays an end-of-year dividend of $1.45. What is your
Haney, Inc.'s preferred stock is selling for $33 per share in the market and pays a $3.60 annual dividend.a. What is the expected rate of return on the stock?b. If an investor's required rate of
Mosser Corporation's common stock paid $1.32 in dividends last year and is expected to grow indefinitely at an annual 7 percent rate. What is the value of the stock if you require an 11 percent
This Mini Case is available in MyFinanceLab. You have finally saved $10,000 and are ready to make your first investment. You have the three following alternatives for investing the money:• A
Define investors' expected rate of return.
In March of this past year, Manchester Electric (an electrical supply company operating throughout the southeastern United States and a publicly held company) was evaluating the cost of equity
Wingate Metal Products, Inc. sells materials to contractors who construct metal warehouses, storage buildings, and other structures. The firm has estimated its weighted average cost of capital to
Saddle River Operating Company (SROC) is a Dallas-based independent oil and gas firm. In the past, the firm's managers have used a single firm-wide cost of capital of 11 percent to evaluate new
In the spring of 2015, the Brille Corporation was involved in issuing new common stock at a market price of $35. Dividends last year were $1.50 and are expected to grow at an annual rate of 5
Carraway Seed Company is issuing a $1,000 par value bond that pays 7 percent annual interest and matures in 15 years. Investors are willing to pay $850 for the bond. Flotation costs will be 3
The preferred stock of Texas Southern Power Company sells for $51 and pays $4.25 in dividends. The net price of the security after issuance costs is $48.00. What is the cost of capital for the
The State Spartan Corporation is considering two mutually exclusive projects. The free cash flows associated with these projects are as follows:PROJECT A PROJECT BInitial
How should managers compare two mutually exclusive projects of unequal size? Should the approach change if capital rationing is a factor?
McDoogals Restaurants has come up with a new fast-food, casual restaurant combining some of the features of Chipotle, Panera, and Shake Shack, but it is not quite sure how the public will react to
The Hokie Corporation is considering two mutually exclusive projects. Both require an initial outlay of $10,000 and will operate for 5 years. Project A will produce expected cash flows of $5,000 per
The G. Wolfe Corporation is examining two capital-budgeting projects with 5-year lives. The first, project A, is a replacement project; the second, project B, is a project unrelated to current
At present, Solartech Skateboards is considering expanding its product line to include gas-powered skateboards; however, it is questionable how well they will be received by skateboarders. Although
It's been 2 months since you took a position as an assistant financial analyst at Caledonia Products. Although your boss has been pleased with your work, he is still a bit hesitant about unleashing
Simple Metal Works, Inc. will manufacture and sell 300,000 units next year. Fixed costs will total $350,000, and variable costs will be 65 percent of sales.a. The firm wants to achieve a level of
The Quarles Distributing Company manufactures an assortment of cold air intake systems for high-performance engines. The average selling price for the various units is $600. The associated variable
Bill and Kate Theil are not only husband and wife but entrepreneurs who have established three successful businesses. The proposed plan for their latest effort involves a series of international
Camping USA Inc. has been operating for only 2 years in the outskirts of Albuquerque, New Mexico, and is a new manufacturer of a top-of-the-line camping tent. You are starting an internship as
Define the term operating leverage. What type of effect occurs when the firm uses operating leverage?
What is the objective of capital structure management?
Simpson Energy earned $3 million in net income last year and for the first time ever paid its common stockholders a cash dividend of $0.12 per share. The firm has 10 million shareholders. What was
In the spring of 2016, the CFO of HTPL Distributing Company decided to distribute a stock dividend to its shareholders. Specifically, the CFO proposed that the company pay 0.05 shares of stock to the
WW International (WWI) recently declared a 3-for-1 stock split for its common shares. Before the split, the firm's share price had risen to $450 per share and the firm's CFO felt that this high stock
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