(a) Describe two non-forfeiture options.

(b) For each one of the non-forfeiture options you described in part (a), give a family situation for which you would recommend that option and explain why.

Katie Homes and Garden Co. has 13,500,000 shares outstanding. The stock is currently selling at $56 per share. If an unfriendly outside group acquired 15 percent of the shares, existing stockholders will be able to buy new shares at 25 percent below the currently existing stock price.

a. How many shares must the unfriendly outside group acquire for the poison pill to go into effect? (Do not round intermediate calculations.)
  

b. What will be the new purchase price for the existing stockholders? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
  

identify two firms one with a beta more than 1.5 and another with a beta of less than 0.7. Report your findings by naming the firms and their betas, describing their products, and explaining why you believe the beta seems predictable (or perhaps not predictable) for the firms chosen.

1. a)            What are the cash flows associated with a bond?

2.             What are the distinguishing features of debt as compared to equity?

3.             What is the indenture? What are protective covenants. Give some examples.

4.            Define the following types of Bonds:

                –   Euro Bond

                –   Zero-Coupon Bond

                –   Samurai Bond

                –   Equipment Obligation Bond

2. a)            Differentiate between term Loans and Bonds.

Country is India

Discuss how regional economic integration has influenced the way your country does business with other nations. Does it create more opportunities for trade or just increase the competition? Make some observations about the impact this might have on an organization's decision to invest in the country.

You would like to buy a house that costs $350,000. You have $50,000 in cash that you can put down on the house, but you need to borrow the rest of the purchase price. The bank is offering you a 30-year mortgage that requires annual payments and has an interest rate of 7% per year. You can afford to pay only $23,500 per year. The bank agrees to allow you to pay this amount each year, yet still borrow $300,000. At the end of the mortgage (in 30 years), you must make a balloon payment; that is, you must repay the remaining balance on the mortgage. How much will be this balloon payment?

1. Reel Fast Charters, based in the Bahamas, runs multi-day fishing charters for wealthy anglers.  They have been very successful in their first five years in operation and Brian (the owner) is considering adding a second boat.  A new 80’ Viking would cost $5,000,000 with another $1,000,000 needed to upgrade the interior to a level that would attract the wealthy clients they desire.  The boat would be depreciated straight-line over 15 years, but would be sold at the end of five years, for an estimated $5,000,000.  The new boat would generate estimated additional revenue of $2,000,000 per year and would have associated expenses of $625,000.  No additional working capital would be necessary.  The firm’s tax rate is 30% and the required rate of return is 12%.  Calculate the NPV and IRR.  Should the new boat be purchased?  

ABC needs $719,000 to take advantage of a special offer from their key supplier. The loan will allow them to reduce their accounts payable and begin taking trade discounts. They plan to repay the loan in one year out of their normal operating cash flows. The bank has offered a one-year discount loan at an annual percentage rate of 5.25%. Given this information, how many dollars of interest is ABC expected to pay for this arrangement?

You are borrowing $26,000 to buy a car. You have a choice of a 36 month loan at an annual interest rate of 4.1 percent or a 60 month loan where the annual interest rate is 0.5 percent higher. If you select the 60 month loan instead of the 36 month loan, how much more total dollars of interest will you pay over the life of the loan?

Your investment club has only two stocks in its portfolio. $10,000 is invested in a stock with a beta of 0.5, and $75,000 is invested in a stock with a beta of 1.5. What is the portfolio's beta? Round your answer to two decimal places.

Required Rate of Return

AA Corporation’s stock has a beta of 1.1. The risk-free rate is 2.5% and the expected return on the market is 11%. What is the required rate of return on AA's stock? Round your answer to two decimal places.

Required Rate of Return

Suppose r_RF = 5%, r_M = 12%, and r_A = 14%.

1. Calculate Stock A's beta. Round your answer to two decimal places.
   
   
2. If Stock A's beta were 1.5, then what would be A's new required rate of return? Round your answer to two decimal places.
   

The possible outcomes for the returns on Stock X and the returns on the market portfolio have been estimated as follows:                                                              
                        Scenario          Stock X             Market portfolio                                 
                        1                      9%                   10%                             
                        2                      21%                 13%                             
                        3                      13%                 11%                   

Each scenario is considered to be equally likely to occur. Calculate the covariance of the returns of Stock X and the market portfolio.

A) 0.03%

B) 0.57%

C) 1.62%                                                         

D) 0.06%

The following data is provided for a market 500 Index:                                                               
                                                                                    
                        Year     Total return     Year     Total return                 
                        2010    9.0%                2020    2.0%                
                        2011    11.0%             2021    3.0%                
                        2012    -3.0%               2022    3.0%                
                        2013    1.0%                2023    -1.0%               
                        2014    5.0%                2024    5.0%                
                        2015    -12.0%             2025    4.0%                
                        2016    3.0%                2026    -3.0%               
                        2017    4.9%                2027    3.5%                
                        2018    -7.0%               2028    7.0%                
                        2019    0.1%                2029    5.8%                
                                                                                    
Calculate the 20-year arithmetic average annual rate of return on the market Index.

A) 2.07%

B) 0.10%

C) 2.59%

D) 5.62%                                                          

3) A British firm has a subsidiary in the U.S., and a U.S. firm, known to the British firm, has a subsidiary in Britain. Define and then provide an example for each of the following management techniques for reducing the firm's operating cash flows. The following are techniques to consider:

a)   matching currency cash flows

b)   risk-sharing agreements        

c)   back-to-back or parallel loans

Quantitative Problem: At the end of last year, Edwin Inc. reported the following income statement (in millions of dollars): Sales $4,150 Operating costs excluding depreciation 3,055 EBITDA $1,095 Depreciation 305 EBIT $790 Interest 160 EBT $630 Taxes (40%) 252 Net income $378 Looking ahead to the following year, the company's CFO has assembled this information: •Year-end sales are expected to be 5% higher than $4.15 billion in sales generated last year. •Year-end operating costs, including depreciation, are expected to increase at the same rates as sales. •Interest costs are expected to remain unchanged. •The tax rate is expected to remain at 40%. On the basis of this information, what will be the forecast for Edwin's year-end net income? Round your answer to the nearest whole million. Do not round intermediate calculations. Enter all values as positive numbers. (in millions of dollars) Sales $ Operating costs including depreciation EBITDA $ Depreciation EBIT $ Interest EBT $ Taxes Net income $