1. What is the net value of common equity for a firm with 3 million shares issued, 1 million shares outstanding, $4 million of retained earnings, $2 million of treasury stock at cost, $1 million in additional paid-in capital, and a $1 par value per share?

2. If the lease payments of the $800,000 asset were $210,000, first payment occurring at the beginning of the first year when the lease is signed, and tax rate is 40%. What would the CCA tax shields be for Years 0 and 4, assuming these tax shields start in Year 0 and end in Year 4? Remember: CCA = 30%. A) $48,000 and $27,989 B) $52,000 and SO C) $120,000 and $69,972 D) $48,000 and $69,972

3. If the lease payment for the machine in Question above were made in advance, starting at the beginning of the first year of the contract, what would the size of such a payment now be as an equivalent annual cost? A) $71,455 B) $14,644 C) $15,533 D) $15,816

4. A share of stock is currently priced at $20 and will change with equal likelihood to either $50 or $10. A call option with a $25 exercise price is available on the stock. How many shares of stock must be purchased to replicate the payoff from owning one call option?

5. What is the value of a convertible bond with a conversion ratio of 25, face value of $1,000, coupon of 10% and yield of 10 percent? Common stock of this firm is currently selling at $35. 

6. Joe sold a put option on ZZZ Corp. with an exercise price of $40. The option expires tomorrow and ZZZ is currently trading at $28 per share. The option premium was $4 per share. What is Joe's profit per share if the option is exercised tomorrow?

7. A farmer hedged his risk by buying put options on wheat with an exercise price of $2.70 at a price of $0.14 per bushel. If the price of wheat at the expiration of the contract is $2.70, what is the net revenue from each bushel of wheat ? 

8. General Mills bought September call options for wheat with an exercise price of $2.80 at a price of SO.10 per bushel. If the price of wheat at the expiration is $2.90, what is the cost of one bushel of wheat for General Mills

Answer rating: 100% (QA)

1 To calculate the net value of common equity we need to use the following formula Net value of common equity Number of shares issued Number of treasury shares Par value per share Retained earnings Ad... View the full answer