ABC has just issued a $1,000 par value bond that will mature in 10 years. This bond pays interest of $45 every six months. If the annual yield to maturity of this bond is 7%, what is the price of the ABC bond if the market is in equilibrium?

The Taylors have purchased a $310,000 house. They made an initial down payment of $30,000 and secured a mortgage with interest charged at the rate of 7%/year on the unpaid balance. Interest computations are made at the end of each month. If the loan is to be amortized over 30 years, what monthly payment will the Taylors be required to make? (Round your answer to the nearest cent.)
$

What is their equity (disregarding appreciation) after 5 years? After 10 years? After 20 years? (Round your answers to the nearest cent.)

Masterson, Inc., has 4 million shares of common stock outstanding. The current share price is $70, and the book value per share is $9. The company also has two bond issues outstanding. The first bond issue has a face value of $75 million, has a coupon rate of 7 percent, and sells for 95 percent of par. The second issue has a face value of $60 million, has a coupon rate of 6 percent, and sells for 107 percent of par. The first issue matures in 25 years, the second in 8 years. Both bonds make semiannual coupon payments.

a. What are the company's capital structure weights on a book value basis? (Do not round intermediate calculations and round your answers to 4 decimal places, e.g., .1616.)

b. What are the company’s capital structure weights on a market value basis? (Do not round intermediate calculations and round your answers to 4 decimal places, e.g., .1616.)

c. Which are more relevant, the book or market value weights?

14. Broussard Skateboard’s sales are expected to increase by 15% from $8 million in 2013 to $9.2 million in 2014. Its assets totaled $5 million at the end of 2013. Broussard is already at full capacity, so its assets must grow at the same rate as projected sales. At the end of 2013, current liabilities were $1.4 million, consisting of $450,000 of accounts payable, $500,000 of notes payable, and $450,000 of accruals. The after-tax profit margin is forecasted to be 6%, and the forecasted payout ratio is 40%. Answer the following questions.
    2. Use the AFN equation to forecast Broussard’s additional funds needed for the coming year.
    3. What would be the additional funds needed if the company’s year-end 2013 assets had been $7 million? Assume that all other numbers, including sales, remain the same. Why is the AFN different in this scenario? Is the company’s “capital intensity” ratio the same or different?
    4. Return to the assumption that the company had $5 million in assets at the end of 2013, but now assume that the company pays no dividends. Under these assumptions, what would be the additional funds needed for the coming year? Why is this AFN different from the one in part a?

Which of the following statements is true?

Group of answer choices

If a firm has a project that management believes will be very successful, management is more likely to finance the project with debt financing than with new equity

Issuing new equity is a positive signal to investors

Issuing debt is a negative signal to investors

If a firm has a project that management believes will be very successful, management is more likely to finance the project with equity than with debt           

Abu Dhabi Diversified Holdings, Inc. has $400 in total assets, $10 million in note payable, and $50 million in long-term debt.

[a] Explain the importance of a company’s capital structure.

[b] What is the debt ratio of Abu Dhabi Diversified Holdings.

[c] Based on the capital structure of Abu Dhabi Diversified Holdings, how would you advise the company to finance its aggressive expansion plans.

You are considering a merger of two companies:

                                                Company A                             Company B

Value of Assets (MV)            $ 10 Billion                            $ 100 Billion

Debt (MV)                              $ 5 Billion                             $ 10 Billion

Maturity of Debt                          5 years                                       5 years

Volatility                                     35%                                              40%

Rf                                                  2%                                                 2%

If company B wants to buy Company A’s equity and pay off its debt as part of the merger,

(a) use the Black-Scholes model to analyze the market value of the equity and the debt of A and B before the merger

(b) If the two firms are merged and there is no synergy, and the combined firm has volatility of 32%, use the Black-Scholes model to analyze the market value of the equity and the debt of B of the combined firm

(c) does this merger makes sense for the stockholders of A and B? Explain

acme bank is making a commercial real estate loan to jackson apartments with the following data purchase price 20 million, loan to value ratio of 75%, minimum debt service coverage 1.1 times, interest rate of 5%, cap rate of 7% and 30 year amortization. which of the following statements are false? a) cash on cash return in year one is 6.67% b) loan yield is 9.33% c) debt coverage ratio is 1.45 times

Suppose a company has proposed a new 4-year project. The project has an initial outlay of $70,000 and has expected cash flows of $20,000 in year 1, $23,000 in year 2, $29,000 in year 3, and $35,000 in year 4. The required rate of return is 12% for projects at this company. What is the discounted payback for this project? (Answer to the nearest tenth of a year, e.g. 3.2)

1. Venture capitalists often will describe long-term financing stages of a company using an “alphabet soup” of terminology. For example, Series A financing, etc.

What are the four stages of investment in this alphabet soup, and what do they represent?

Given that business is about maximizing stakeholder wealth and given that there are laws governing the process by which this is accomplished, is there even room for ethics in business? In other words, if organizations (and organizational members) follow the law, is there any additional need for ethical considerations? When organizations maximize stakeholder wealth, aren't they already doing the "right" thing according to the design and purpose of organizational existence?

Hastings Corporation is interested in acquiring Vandell Corporation. Vandell has 1 million shares outstanding and a target capital structure consisting of 30% debt; its beta is 1.20 (given its target capital structure). Vandell has $8.00 million in debt that trades at par and pays a 7% interest rate. Vandell’s free cash flow (FCF₀) is $1 million per year and is expected to grow at a constant rate of 5% a year. Vandell pays a 30% combined federal and state tax rate. The risk-free rate of interest is 4%, and the market risk premium is 6%. Hasting’s first step is to estimate the current intrinsic value of Vandell.

1. What are Vandell’s cost of equity and weighted average cost of capital? Do not round intermediate calculations. Round your answers to two decimal places.

   Cost of equity:   %

   WACC:   %

2. What is Vandell’s intrinsic value of operations? (Hint: Use the free cash flow corporate valuation model.) Do not round intermediate calculations. Enter your answer in millions. For example, an answer of $1.23 million should be entered as 1.23, not 1,230,000. Round your answer to two decimal places.

   $   million

3. What is the current intrinsic value of Vandell’s stock? Do not round intermediate calculations. Round your answer to the nearest cent.

   $   / share

Hastings Corporation is interested in acquiring Vandell Corporation. Vandell has 1 million shares outstanding and a target capital structure consisting of 30% debt; its beta is 1.45 (given its target capital structure). Vandell has $9.42 million in debt that trades at par and pays a 7.1% interest rate. Vandell’s free cash flow (FCF₀) is $2 million per year and is expected to grow at a constant rate of 5% a year. Both Vandell and Hastings pay a 35% combined federal and state tax rate. The risk-free rate of interest is 4% and the market risk premium is 7%.

Hastings Corporation estimates that if it acquires Vandell Corporation, synergies will cause Vandell’s free cash flows to be $2.6 million, $2.8 million, $3.4 million, and $3.94 million at Years 1 through 4, respectively, after which the free cash flows will grow at a constant 5% rate. Hastings plans to assume Vandell’s $9.42 million in debt (which has a 7.1% interest rate) and raise additional debt financing at the time of the acquisition. Hastings estimates that interest payments will be $1.6 million each year for Years 1, 2, and 3. After Year 3, a target capital structure of 30% debt will be maintained. Interest at Year 4 will be $1.430 million, after which the interest and the tax shield will grow at 5%.

Indicate the range of possible prices that Hastings could bid for each share of Vandell common stock in an acquisition. Do not round intermediate calculations. Round your answers to the nearest cent.

The bid for each share should range between $   per share and $   per share.