Leona Motel’s debt has a face value of $40 million, a coupon rate of 14% (paid semiannually), and expires in 12 years (at t = 12). The current annual yield-to-maturity (stated) for all bonds of the company is 15%.
a. Leona wishes to conserve cash for the next few years. To do this, Leona decides to issue new equity and use the proceeds to purchase the existing debt at the market price. The current stock price of Leona is $60 and there are 2 million shares outstanding. How many shares should Leona issue to purchase the existing debt? Assume the decision to purchase the bond does not change the stock price.
b. Instead, the company decides to issue a zero-coupon bond that matures at t = 5, and use the proceeds to purchase the existing debt at the market price. What is the face value of the zero-coupon bond that Leona needs to issue?
In: Finance
In: Psychology
Question 1 [35 marks]
|
A foundry that specializes in producing custom blended alloys has received an order for 1 000 kg of an alloy containing at least 5% chromium and not more than 50% iron. Four types of scrap which can be easily acquired can be blended to produce the order. The cost and metal characteristics of the four scrap types are given below: Scrap type |
||||
|
Item |
1 |
2 |
3 |
4 |
|
Chromium |
5% |
4% |
- |
8% |
|
Iron |
40% |
80% |
60% |
32% |
|
Cost per kg |
R6 |
R5 |
R4 |
R7 |
The purchasing manager has formulated the following LP model:
Minimise COST = 6M1 + 5M2 + 4M3 + 7M4
subject to
0,05M1 + 0,04M2 + 0,08M4 ≥ 50 (CHRM)
0,40M1 + 0,80M2 + 0,60M3 + 0,32M4 ≤ 500 (IRON)
M1 + M2 + M3 + M4 = 1000 (MASS)
and all variables ≥ 0,
where Mi = number of kg of scrap type i purchased, i=1,2,3,4.
(a) Solve this model using LINDO or SOLVER.
(b) Write down the foundry's optimal purchasing plan and cost.
Based on your LINDO or SOLVER solution answer the following questions by using only the initial printout of the optimal solution. (This means that you may not change the relevant parameters in the model and do reruns.)
(c) How good a deal would the purchasing manager need to get on scrap type 1 before he would be willing to buy it for this order?
(d) Upon further investigation, the purchasing manager finds that scrap type 2 is now being sold at R5,40 per kg. Will the purchasing plan change? By how much will the cost of purchasing the metals increase?
(e) The customer is willing to raise the ceiling on the iron content in order to negotiate a reduction in the price he pays for the order. How should the purchasing manager react to this?
(f) The customer now specifies that the alloy must contain at least 6% chromium. Can the purchasing manager comply with this new specification? Will the price charged for the order change?
In: Math
Sociology:
Why does it appear that most of society would believe that crime rates are increasing?
In: Psychology
What audit area should the company be prepared for the auditor to review all purchases?
In: Finance
In: Finance
Dislocations can work as sinks and sources of vacancies. Explain.
In: Mechanical Engineering
Critically discuss the effect of increasing the amount paid upfront when corporations make capital purchases, focusing on the benefits and drawbacks
In: Finance
In: Psychology
What recent factors have made U.S. markets less attractive to foreign investors and issuers?
In: Finance
As the process of communication is presented, the idea of "noise" is discussed.
When you think of "noise", in what ways does it impact relationships?
Where do you think/believe we mess up? What do you think might be helpful?
Why do you think understanding the process of communication is important for all of us.
In: Psychology
A person with mass mp = 78 kg stands on a spinning platform disk with a radius of R = 2.37 m and mass md = 198 kg. The disk is initially spinning at ω = 1.4 rad/s. The person then walks 2/3 of the way toward the center of the disk (ending 0.79 m from the center).
1)What is the total moment of inertia of the system about the center of the disk when the person stands on the rim of the disk?
2)What is the total moment of inertia of the system about the center of the disk when the person stands at the final location 2/3 of the way toward the center of the disk?
3)What is the final angular velocity of the disk?
4)What is the change in the total kinetic energy of the person and disk? (A positive value means the energy increased.)
5)What is the centripetal acceleration of the person when she is at R/3?
6)If the person now walks back to the rim of the disk, what is the final angular speed of the disk?
In: Physics
Human Sexuality issues always sparks much debate. Do you believe in soul mates? How about love at first sight? Do you think you’re destined to find that one-in-six-billion diamond in the rough or is happily-ever-after a matter of compromise, hard work and compatibility? You may think you’ve selected your paramour based on similar interests or that witty sense of humor, but science suggests that there are biological forces at play as well. please submit a one-page reflection on what you may have learned and/or what may have surprised you regarding the topic of Sex Science
In: Psychology
Using OpenGL develop a C code that a) draws a point that moves clockwise slowly along a circle with a center at (0,0). You may want to draw a circle first, and a point that moves on the circle with a different color. b) draws a 2D star inside the circle.
In: Computer Science
“If a stock goes up, you should sell it to lock in the gain and buy another stock, but if it goes down you should hold it to recoup the loss”.
Evaluate this statement a) with no taxes, and b) with taxes.
In: Finance