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Finance
Icy Candy announces a 1 for 8 bonus issues. Icing Candy shares are trading at $9.00 before the bonus issue.
a. Calculate the theoretical price of Icing Candy’s shares immediately after the bonus issue.
b. Casper has 1,000 shares in Icy Candy before Icing Candy announced the 1 for 8 bonus issue.
i. How many bonus shares will Casper entitle to?
ii. Find the value of Casper’s stockholding in Icy Candy before and after the bonus issue.
a. Calculate the theoretical price of Icing Candy’s shares immediately after the bonus issue.
b. Casper has 1,000 shares in Icy Candy before Icing Candy announced the 1 for 8 bonus issue.
i. How many bonus shares will Casper entitle to?
ii. Find the value of Casper’s stockholding in Icy Candy before and after the bonus issue.
Finance
1.You are considering the purchase of a stock that is currently selling at $64 per share. You expect the stock to pay $4.5 in dividends next year.
a. If dividends are expected to grow at a constant rate of 3 percent per year, what is your expected rate of return on this stock?
b. If dividends are expected to grow at a constant rate of 5 percent per year, what is your expected rate of return on this stock?
c. What do your answers to part (a) and part (b) indicate about the impact of dividend growth rates on expected rate of returns on stocks?
2.Icy Candy announces a 1 for 8 bonus issues. Icing Candy shares are trading at $9.00 before the bonus issue.
a. Calculate the theoretical price of Icing Candy’s shares immediately after the bonus issue.
b. Casper has 1,000 shares in Icy Candy before Icing Candy announced the 1 for 8 bonus issue.
i. How many bonus shares will Casper entitle to?
ii. Find the value of Casper’s stockholding in Icy Candy before and
after the bonus issue.
a. If dividends are expected to grow at a constant rate of 3 percent per year, what is your expected rate of return on this stock?
b. If dividends are expected to grow at a constant rate of 5 percent per year, what is your expected rate of return on this stock?
c. What do your answers to part (a) and part (b) indicate about the impact of dividend growth rates on expected rate of returns on stocks?
2.Icy Candy announces a 1 for 8 bonus issues. Icing Candy shares are trading at $9.00 before the bonus issue.
a. Calculate the theoretical price of Icing Candy’s shares immediately after the bonus issue.
b. Casper has 1,000 shares in Icy Candy before Icing Candy announced the 1 for 8 bonus issue.
i. How many bonus shares will Casper entitle to?
ii. Find the value of Casper’s stockholding in Icy Candy before and
after the bonus issue.
Finance
As a stockholder in Randolph Corporation, you receive its annual report.
In the financial statements, Randolph has reported that the after-tax (net)
income is $300 million. With 150 million shares of common stock
outstanding, Randolph announced to distribute $100 million of dividends
to its shareholders. The stock is now sold for $20 per share.
i. Calculate the value of investor’s wealth who holds 4,000 shares of Randolph
Corporation before the ex-dividend date,
ii. Calculate the dividend income of an investor who holds 4,000 shares of
Randolph Corporation until the ex-dividend date,
iii. Calculate the value of shareholding on the ex-dividend date of an investor who
holds 4,000 shares of Randolph Corporation.
In the financial statements, Randolph has reported that the after-tax (net)
income is $300 million. With 150 million shares of common stock
outstanding, Randolph announced to distribute $100 million of dividends
to its shareholders. The stock is now sold for $20 per share.
i. Calculate the value of investor’s wealth who holds 4,000 shares of Randolph
Corporation before the ex-dividend date,
ii. Calculate the dividend income of an investor who holds 4,000 shares of
Randolph Corporation until the ex-dividend date,
iii. Calculate the value of shareholding on the ex-dividend date of an investor who
holds 4,000 shares of Randolph Corporation.
Finance
As a stockholder in Randolph Corporation, you receive its annual report. In the financial statements, Randolph has reported that the after-tax (net) income is $300 million. With 150 million shares of common stock outstanding, Randolph announced to distribute $100 million of dividends to its shareholders. The stock is now sold for $20 per share.
a. Assume that Randolph Corporation does not have any outstanding debt. The current share price reflects the fair value of the Corporation.
i. Find the market value of Randolph Corporation after the ex-dividend date,
ii. Find the price per share of Randolph Corporation after the ex-dividend date,
iii. Calculate the value of investor’s wealth who holds 4,000 shares of Randolph Corporation before the ex-dividend date,
a. Assume that Randolph Corporation does not have any outstanding debt. The current share price reflects the fair value of the Corporation.
i. Find the market value of Randolph Corporation after the ex-dividend date,
ii. Find the price per share of Randolph Corporation after the ex-dividend date,
iii. Calculate the value of investor’s wealth who holds 4,000 shares of Randolph Corporation before the ex-dividend date,
Finance
As a stockholder in Randolph Corporation, you receive its annual report. In the financial statements, Randolph has reported that the after-tax (net) income is $300 million. With 150 million shares of common stock outstanding, Randolph announced to distribute $100 million of dividends to its shareholders. The stock is now sold for $20 per share.
a. Assume that Randolph Corporation does not have any outstanding debt. The current share price reflects the fair value of the Corporation.
i. Find the market value of Randolph Corporation after the ex-dividend date,
ii. Find the price per share of Randolph Corporation after the ex-dividend date,
iii. Calculate the value of investor’s wealth who holds 4,000 shares of Randolph Corporation before the ex-dividend date,
iv. Calculate the dividend income of an investor who holds 4,000 shares of Randolph Corporation until the ex-dividend date,
v. Calculate the value of shareholding on the ex-dividend date of an investor who holds 4,000 shares of Randolph Corporation.
a. Assume that Randolph Corporation does not have any outstanding debt. The current share price reflects the fair value of the Corporation.
i. Find the market value of Randolph Corporation after the ex-dividend date,
ii. Find the price per share of Randolph Corporation after the ex-dividend date,
iii. Calculate the value of investor’s wealth who holds 4,000 shares of Randolph Corporation before the ex-dividend date,
iv. Calculate the dividend income of an investor who holds 4,000 shares of Randolph Corporation until the ex-dividend date,
v. Calculate the value of shareholding on the ex-dividend date of an investor who holds 4,000 shares of Randolph Corporation.
Finance
UFO Company has issued a perpetual bond paying $50 coupon interests each year indefinitely. This perpetual bond, with a face value of $1000, is currently trading at a price of 1,500.
Calculate the current interest rate of UFO’s perpetual bond.
Calculate the current interest rate of UFO’s perpetual bond.
Finance
UFO Company has issued a perpetual bond paying $50 coupon interests each year indefinitely. This perpetual bond, with a face value of $1000, is currently trading at a price of 1,500.
Calculate the current interest rate of UFO’s perpetual bond.
Calculate the current interest rate of UFO’s perpetual bond.
Finance
Given the following information relating to the yields to maturity on several one- year, zero-coupon bonds:
Bond Yield (%)
US Treasury 3.0
AAA Corporate 3.3
A Corporate 3.9
BB Corporate 4.8
a. Find the price of a one-year, zero-coupon corporate bond with a AAA rating.
b. Find the credit spread on the AAA-rated corporate bonds.
c. Find the credit spread on the A-rated corporate bonds.
d. Find the credit spread on the BB-rated corporate bonds.
e. In what way does the credit spread change with the bond rating?
Bond Yield (%)
US Treasury 3.0
AAA Corporate 3.3
A Corporate 3.9
BB Corporate 4.8
a. Find the price of a one-year, zero-coupon corporate bond with a AAA rating.
b. Find the credit spread on the AAA-rated corporate bonds.
c. Find the credit spread on the A-rated corporate bonds.
d. Find the credit spread on the BB-rated corporate bonds.
e. In what way does the credit spread change with the bond rating?
Finance
As a stockholder in Randolph Corporation, you receive its annual report. In the financial statements, Randolph has reported that the after-tax (net) income is $300 million. With 150 million shares of common stock outstanding, Randolph announced to distribute $100 million of dividends to its shareholders. The stock is now sold for $20 per share.
a. Assume that Randolph Corporation does not have any outstanding debt. The current share price reflects the fair value of the Corporation.
i. Find the market value of Randolph Corporation before the ex-dividend date,
ii. Find the market value of Randolph Corporation after the ex-dividend date,
iii. Find the price per share of Randolph Corporation after the ex-dividend date,
a. Assume that Randolph Corporation does not have any outstanding debt. The current share price reflects the fair value of the Corporation.
i. Find the market value of Randolph Corporation before the ex-dividend date,
ii. Find the market value of Randolph Corporation after the ex-dividend date,
iii. Find the price per share of Randolph Corporation after the ex-dividend date,
Finance
Beckheart is seeking fi nancing for its inventory. Safe-Proof
Warehouses off ers space in their facility for Beckheart’s inventory.
They off er loans with a 15 percent APR equal to 60 percent of the
inventory. Monthly fees for the usage of the warehouse are $500 plus
0.5 percent of the inventory’s value. If Beckheart has saleable inventory
of $2 million, answer the following:
a. How much money can the fi rm borrow?
b. What is the interest cost of the loan in dollars over a year?
c. What is the total amount of fees to be paid in a year?
d. What is the eff ective annual rate of using Safe-Proof to fi nance
Beckheart’s inventory?
Warehouses off ers space in their facility for Beckheart’s inventory.
They off er loans with a 15 percent APR equal to 60 percent of the
inventory. Monthly fees for the usage of the warehouse are $500 plus
0.5 percent of the inventory’s value. If Beckheart has saleable inventory
of $2 million, answer the following:
a. How much money can the fi rm borrow?
b. What is the interest cost of the loan in dollars over a year?
c. What is the total amount of fees to be paid in a year?
d. What is the eff ective annual rate of using Safe-Proof to fi nance
Beckheart’s inventory?
