Suppose you know that a company’s stock currently sells for $74 per share and the required return on the stock is 9.9 percent. You also know that the total return on the stock is evenly divided between a capital gains yield and a dividend yield. It's the company’s policy to maintain a constant growth rate in its dividends. What is the current dividend per share? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Hint: First, compute the current dividend yield. Then, use that to compute the next dividend paid (in dollars per share). Then, using the constant dividend growth rate, compute the last dividend paid. The dividend is equal to the dividend yield multiplied by the stock price. Remember that the current stock price reflects future dividends, starting with D1, where D1 = D0(1 + g).

Monopoly with linear inverse demand. Consider a monopolist facing a linear inverse demand curve p(q)= a- bq, and cost function C(q)= F + cq, where F denotes its fixed costs and c represents the monopolist's (constant) magical cost a>c

1. Graph demand, marginal revenue and marginal cost. Label your graph carefully, including intercepts

2. Solve the profit maximizing output q^m. To do this, first write down the expression for MR=MC and solve for the optimal quantity. Next find the price that consumers are willing to pay for qM using the demand curve.

3. Write the expression for monopoly profits in terms of parameters a, b, F, and C/

4. Show q^m, p^m, and π^m on your graph

5. Write an expression for quantity, price, and profits under perfect competition

• Evanston Insurance, Inc., has purchased shares of Stock E at $50 per share. It will sell the stock in six months. It considers using a strategy of covered call writing to partially hedge its position in this stock. The exercise price is $53, the expiration date is six months, and the premium on the call option is $2. Complete the following table:

  POSSIBLE PRICE OF STOCK E IN SIX MONTHS	PROFIT OR LOSS PER SHARE IF A COVERED CALL STRATEGY IS USED	PROFIT OR LOSS PER SHARE IF A COVERED CALL STRATEGY IS NOT USED
  $47
  50
  52
  55
  57
  60

• Assume that each of the six stock prices in the table's first column has an equal probability of occurring. Compare the probability distribution of the profits (or losses) per share when using covered call writing versus not using it. Would you recommend covered call writing in this situation? Explain.

Enviro Company issues 6.50%, 10-year bonds with a par value of $350,000 and semiannual interest payments. On the issue date, the annual market rate for these bonds is 3.50%, which implies a selling price of 125 7/8. The straight-line method is used to allocate interest expense.
   
1. Using the implied selling price of 125 7/8. what are the issuer’s cash proceeds from issuance of these bonds?

2. What total amount of bond interest expense will be recognized over the life of these bonds?

Total Bond Interest Expense Over Life of Bonds:

Amount repaid:

20 payments of $11,375= $227,500

   Par Value at Maturity $350,000

Total repayments    $577,500

Less amount borrowed

Total bond interest expense

3. What is the amount of bond interest expense recorded on the first interest payment date?

Upon its founding, the high-potential firm issued 10 million shares of stock in total, all held by the two co-founders after having been granted at $0.05 per share. No additional shares are to be issued. (A decision about issuing new shares would be reconsidered in the event the firm went public at some time in the future). One year after founding a VC invests $3.5 million in startup-stage financing at a share price of $1.25. In an additional round of financing several months later the VC invests an additional $6 million at a share price that places the company's valuation at double that after the first financing round. If the founders were able to liquidate their remaining shares immediately after this second round, what would their shares be worth in total?

Quencher Limited is planning to produce mineral water. It is contemplating to purchase a plant with a capacity of 100,000 bottles a month. For the first year of operation the company expects to sell between 60,000 to 80,000 bottles. The budgeted costs at each of the two levels are as follows:

GHS

Particular 60,000 bottles 80,000 bottles

Material 360,000 480,000

Labour 200,000 260,000

Factory overheads 120,000 150,000

Administration expenses 100,000 110,000

The production would be sold through retailers who will receive a commission of 8% of sale price

Required

a) Compute the break-even point in GHS and units, if the company decides to fix the sales price at GHS16 per bottle.

b) Compute the break-even point in units, if the company offers a discount of 10% on purchase of 20 bottles or more, assuming that 20% of the sales will be to buyers who will avail the discount.

1. The government has considered the following market phenomena to be "bad" and has taken steps to correct them:
   
   The first wave of antitrust legislation was aimed at breaking up monopolies (single sellers of unique products) and outlawing monopoly practices (price "gouging" and price discrimination). Diagram and explain why monopolies and monopoly behavior are "bad."
   
   The second wave of antitrust legislation was aimed at preventing the growth of monopolizes (horizontal integration of firms selling the same product) and outlawing behavior that sought to either drive out competitors or prevent their entry (discounting, entry-level pricing, and dumping). Explain why excessive competition with intent to monopolize is "bad."
   
   Subsequently, the government has attacked, by litigation, combinations based on other more strategic anti-competitive behaviors, i.e., vertical integration and agglomeration.
   Explain why vertical integration may be "bad."
   Explain why agglomeration may be "bad."
   ​​​​​​​

On March 31st, 2020, Adtech Inc. issued $200,000, 9%, 10-year bonds. The bonds pay interest semi-annually, on September 30 and March 31. The first interest payment is on September 30, 2020. The bonds are issued at a price of 114 1/4 (i.e., $228,500). The issuance price implies an effective interest rate of 7%. Bond issue costs are $10,000, which are amortized using the straight-line method. Adtech's fiscal year-end is on December 31.

1. Prepare all necessary journal entries in relation to these bonds between March 30, 2020 and April 1st, 2021. Make sure you indent your credit and clearly mark the date for each journal entry.

2. What is the amount of the liability that Adtech has to the bondholders on September 30, 2021, after the interest payment on that date?

Karen runs a print shop that makes posters for large companies. It is a very competitive business. The market price is currently $1 per poster. She has fixed costs of $250. Her variable costs are $1,800 for the first thousand posters, $1,500 for the second thousand, and then $900 for each additional thousand posters.

Instructions: Round your answers to 3 decimal places.

a. What is her AFC per poster (not per thousand!) if she prints 1,000 posters?

     What if she prints 2,000 posters?

     What if she prints 10,000 posters?

b. What is her ATC per poster if she prints 1,000?

     What if she prints 2,000?

     What if she prints 10,000?

  c. If the market price fell to 85 cents per poster, would there be any output level at which Karen would not shut down production immediately? Yes or No