What is a right? How are rights created? Suppose you own 100 shares of ABC Company, which has just announced a rights offering. You will be able to purchase one share of common stock at $20 a share plus four rights. The current market price of the stock is $25 a share.

What will each right be worth after the rights are issued and begin trading? Is it to your advantage to: a) sell the rights, b) use the rights to buy more shares, or c) discard the rights? Explain your answer using a numeric example.

A monopolist has a cost function given by c(?)=?² and faces a demand curve given by P(?)=120−y.

(a)What is its profit-maximizing level of output? What price will the monopolist charge?

(b)Calculate the deadweight loss imposed by the monopolist. Show also the deadweight loss in a graph

(c)If you put a lump sum tax of $100 on this monopolist, what would its output be?

(d)Suppose that you put a specific tax on the monopolist of $20 per unit output. What would its profit-maximizing level of output be?

The demand curve of the only customer in the amusement park is QD = 200-P. The park charges an admission fee of 100, while each ride costs 9.

1. Determine the supply curve of the park.
2. Determine the producer surplus without distortions in the market.
3. Determine the consumer surplus without distortions in the market.
4. Price at which dead weight loss is minimized?
5. At which quantity does it occur (in rides)?
6. if the government wishes to limit the number of rides per person to at most 5 per person, calculate the loss in economic efficiency.

1. Consider the following Country with 100 inhabitants producing wheat and cloths. The Marginal Products of Labor (MPL) in the country are as follows. Wheat 6 Bushels per person per day Cloths 2 Yards per person per day 1. Derive a relationship between ratio of MPLs and ratio of Prices of Wheat and Cloths 2.What is the price of cloths? 3.To determine the production and consumption of wheat and cloths in the country what more information do you require? 4. Use a diagram to show production and consumption of wheat and cloths in the country.

In 100 words, or fewer, explain why investors should be more interested in the Diluted EPS number than the Basic EPS number.

Company X information for Diluted Shares calculations for period 201X: Earnings for Year 201X - $20 million Average Basic shares outstanding for Company X in 201X – 10 million Average Stock Price for year 201X - $6.00 Warrants to purchase common shares: - Warrants A to purchase 2 million shares ex @ $2.00 - Warrants B to purchase 3 million shares ex @ $5.00 for company 201X

(ii) Assume South Africa imports fish from Nigeria and Ethiopia at the free trade prices of R30 and R20 per ton of wool respectively. In autarky, South Africa’s domestic price of fish is R70 and 40 tons of fish are produced and consumed per annum. Use this information, with the aid of a diagram to explain the concept of trade diversion. (9) NB:Your explanation must touch on the pre tariff, 100 percent tariff and the formation of customs union conditions that prevail. You must also use your own quantities on the horizontal axis.

You are considering a new product launch. The project will cost $680,000, have a four-year life, and have no salvage value; depreciation is straight-line to zero. Sales are projected at 100 units per year, price per unit will be $19,000, variable cost per unit will be $14,000, and fixed costs will be $150,000 per year. The required return on the project is 15%, and the relevant tax rate is 35%. Ignore the half-year rule for accounting for depreciation.   

(v) Internal Rate of Return (IRR in %)                                                              (1 mark)

(vi) Average Accounting Return (AAR in %)

A bond portfolio named VEX comprises four bonds (face value=$1000):

1) 100 semi-annual bond, 5-year maturity, a coupon rate of 4%

2) 200 annual bonds, 30-year maturity, 8% coupon bond.

3) 300 zero-coupon bonds, 10-year maturity.

4) 400 zero-coupon bonds, 20-year maturity.

According to the price-duration formula with Macaulay’s duration D, if the yield increases from 6% to 7%, the VEX’s market value should fall by how much ($)?

A stock is currently selling at $100, with a 75% chance of increasing by 25% and a 25% chance of decreasing by 20% each year. The risk-free interest rate is 5% per year (with annual compounding). Assume that the stock will not pay any dividend for the next two years. Consider a put option on this stock, with an exercise price of $105 and two years to maturity. Use a binomial model with two time periods – year one and year two.

a. What is the value of the put if it is European?

b. What is the value of the put if it is American?

Explain and show your work

You are given the following information about various annuities available in the market. All the annuities pay $100 at the end of each year over the period of the investment. It is also given that the spot rate of interest for 1 year maturity is 3%.

Calculate the forward rates of interest for t = 2, 3 and 4. You want to accumulate $10,000 after four years by putting a single payment into a bank account. Based on the information above, calculate the deposit required.