a) Discuss two advantages and two disadvantages of going public for firms.

b) A company makes an initial public offering of shares to raise $220 million, at an offer price of $5.30 per share. The issue is underwritten at $5.00. The costs of preparing the prospectus, legal fees, ASIC registration and other administrative costs add up to $800,000. If the firms’ share price closes at $6.40 on its first day of trade. What is the total cost of the IPO?

c) Explain two important roles of investment bankers in the process of IPO.

a) Discuss two advantages and two disadvantages of going public for firms.

b) A company makes an initial public offering of shares to raise $220 million, at an offer price of $5.30 per share. The issue is underwritten at $5.00. The costs of preparing the prospectus, legal fees, ASIC registration and other administrative costs add up to $800,000. If the firms’ share price closes at $6.40 on its first day of trade. What is the total cost of the IPO?

c) Explain two important roles of investment bankers in the process of IPO.

If the supply of emissions permits decreases

a.the price of permits will fall

b.firms will increase emissions

c.the price of permits will rise

d.more firms will want to buy permits

Emission permits are initially allocated

a.by auction

b.equally across all firms

c.based on current emissions

d.there is no standard way that permits are allocated

The total allowable emissions under a tradable pollution permit system can be reduced

a.by allowing offsets

b.by allowing entities to buy a permit and retire it

c.by allocating more permits as firms grow

d.it can never by reduced

Transfer coefficients

a.define how emissions translate to damages when there are nonuniform emissions

b.define how emissions translate to costs of abatement when emissions are nonuniform

c.are used to adjust for trades across zones with differential marginal emissions damages

d.both the first and third answers

For tradeable pollution permit markets to work well,

a.there must be enough buyers and sellers to support competition

b.there must be effective monitoring

c.both of the above

d.neither of the above

Monitoring of polluters under an emissions trading system is more difficult and costly than with emissions charges.

a.True

b.False

Which of the following is true?

a.Cap-and-trade is a quantity based system.

b.Cap-and-trade is a price based system.

c.A program of emissions charges is a price based system.

d.Both the first and third answers are true.

• Assume, as in the example in the book, that the job separation rate s is 0.01 (1%)

  per month and that the job finding rate f is 0.2 (20%) per month.

• Assume that the labor force is 100 million.

  (a) What is the steady state unemployment rate for this economy?

  (b) Given that L = 100 million, what is the steady state number of employed E and unemployed U ?

(c) If U.S. immigration policy changed today (period t = 1) such that we allowed more people to enter the country and L increased to 110 million from its initial value of 100 million. Assume that these new entrants would be unemployed first and then find jobs at the job finding rate f . Create a table (maybe in Excel) that shows how E, U , and U/L evolve over time, givens = 0.01 and f = 0.2, starting at t = 1 and ending when the unemployment rate reaches its steady state rounded to the nearest thousandth.

(d) In the table from the previous scenario, how many periods does it take for the unemployment rate to reach its steady state level rounded to the nearest thousandth?

Question:

Roster Pte Ltd issued 100 million of 11-year bonds with a 9.5% coupon payable annually. This bond was issued a year ago. The first coupon payment has just been paid. The bonds are callable at 105 beginning today. Floatation costs on that issue were $1 million. Roster pte has 38% marginal tax rate. Roster Pte is planning to call the bonds and refinance at current rates. The following 10 years alternatives exist:

a. 100 million public issue of 8% annual coupon bonds. Floatation costs would be one million.

b. 100 million private placement with 8% semi-annual coupons with a placement fee of 500000.

Call premiums and interest payments are tax deductible but the frontend fee and floatation cost must be capitalized and amortized over the life of the bond.

1. What will be the effective cost of raising funds from the public bond issue using IRR ?

2. Effective cost of raising funds from private placement of debt.?

3. What's the effective after-tax cost of refinancing that would make Roster Pte different calling the bonds and leaving them as it is?

Direct price discrimination is a pricing strategy where different price is charged for different customers over the same goods and or service. This can be done for example when a Barber charges higher to higher income people and lower to lower-income people.

Indirect price discrimination is when consumers are given price options allowing them to choose what suits them the best. A perfect example is when customers but different types of burgers at McDonald’s depending on their income. Direct price discrimination would be better over indirect if the producer or business is able to distinguish and separate customers in terms of nationality, employment, location age, etc. It can also work better when there is no way to perform any form of arbitration and when the consumer cannot easily hide their categorical classification factor like location, age etc. To enable the producer to practice price discrimination, elasticity of demand should be different for different categories of customers. A sensible example would be a higher costing coffee for a group of professionals like doctors and nurses could be less elastic than a cup of coffee for college students at a school café. This is the same product but different levels of elasticity basing on the income levels.

Please respond in 100-150 words

A newly issued bond has a maturity of 10 years and pays a 8.0% coupon rate (with coupon payments coming once annually). The bond sells at par value.

A.) What are the convexity and the duration of the bond? Use the formula for convexity in footnote 7. (Round your answers to 3 decimal places.)

Convexity ______

Duration _________ years

B.) Find the actual price of the bond assuming that its yield to maturity immediately increases from 8.0% to 9.0% (with maturity still 10 years). Assume a par value of 100. (Round your answer to 2 decimal places.)

Actual Price of The Bond _____________

C.)What price would be predicted by the modified duration rule ΔP/P=−D*Δy? What is the percentage error of that rule? (Negative answers should be indicated by a minus sign. Round your answers to 2 decimal places.)

Percentage Change Price ________

Percentage error __________

D.) What price would be predicted by the modified duration-with-convexity rule ΔP/P=−D*Δy⁢+0.5 ×Convexity×(Δy)^2? What is the percentage error of that rule? (Negative answers should be indicated by a minus sign. Round your answers to 2 decimal places.)

Percentage Change Price ________

Percentage error __________

Tops Corporation is organized into two divisions, Manufacturing and Marketing. Both divisions are considered to be profit centers and the two division managers are evaluated in large part on divisional income. The company makes a single product. It is fabricated in Manufacturing and then packaged and sold in Marketing. There is no intermediate market for the product.

The monthly income statements, in thousands of dollars, for the two divisions follow. Production and sales amounted to 10,000 units.

The company has just received an offer to buy 1,000 units of the product this month at a price of $400 per unit. The Marketing Division manager suggests that for the special order only, the transfer price be set at 50 percent of the sales price, or $200 per unit.

Required:

a. What is the current transfer price for a unit?

b. Does Tops Corporation want to accept this order? Accept/Reject

c. Will the Marketing Division manager be willing to accept this order if the transfer price is $200 per unit? Accept/Reject

d. Will the Manufacturing Division manager be willing to accept this order if the transfer price is $200 per unit? Accept/Reject

the following information is retrieved from Penn oil corporation for two divisions ( blending and distribution) out of its eight manufacturing divisions; the company's primary product is Luboil Oil. Each division's costs are provided below:

Blending division:

purchase of 50,000 barrels as crude oil from the secondary Treating division by $35 per barrel. In addition, Blending division paid the following internal cost:

direct material variable costs per barrel of oil $6

total fixed costs $100,000

Assume that the blending division transfer 40,000 barrel to Distribution division and the transfer price per parrel is computing by one of the following methods:

-market price of $69.1

-internal price of 180% of total variable cost

- hybrid price of $70

Distribution didision:

distribution division paid the following internal cost:

direct material variable costs per barrel of oil $10

total fixed costs $120,000

The distribution division sold 35,000 barrel to external customer by$100 per barrel

Required:

1- what is the net operating income for each division using the three transfer price methods?

2-what is the net income for both division using the three transfer price methods?