...FI516-Advanced Financial Management Spring 2011 Week 3 Assignment Chap 8-1 Exercise value = $30 (Current stock price) – $25 (strike price) = $5 Time value = $7 (Option price) – $5 (Exercise value) = $2 Chap 8-2 Time Value = Market price of option - Exercise value $5 = V - $22 V = $27. Exercise value = P0 - Strike price $22 = P0 - $15 P0 = $37. Chap 15-8 a. = D + S = 0 + ($15/share)(200,000 # share) = $3,000,000(value) WACC = wd rd(1-T) + wcers = 0 + (1.0)(0.10) = 10% WACC = wd rd(1-T) + wcers = (0.30)(.07)(1-0.40taxes) + (0.70)(.11) = 8.96%. b. Debt = wd V = 0.30($3,000,000) = $900,000 S = V – D = $900,000 P = [S + (D – D0)]/n0 = [$200,000 + ($900,000) – 0)]/200,000 = $5.50 c. X = (D – D0)/P = $200,000 / $5.50 = 36363.636 n = 200,000 – 36363.636 = 163636.364. Initial position EPS = NI/n0 = [(EBIT – Int.)(1-T)] / n0 = [($500,000 – 0)(1-0.40)] / 200,000 = $1.50. Using financial leverage EPS = [($500,000 – 0.07($200,000) (1-0.40)] / 163636.364 = [($500,000 – $14000) (1-0.40)] / 163636.364 = $486,000 / 163636.364 = $1.782 If we add more debt the EPS will increase d. with 30% in debt TIE = = EBIT/I =EBIT/14,000 Probability TIE 0.10 (7.14) 0.20 14.2 0.40 35.71 0.20 57.14 0.10 ...
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...FI516 – WEEK 1 – HOMEWORK ANSWER KEY Problem 14-10 14-10 a. 1. 2011 Dividends = (1.10)(2010 Dividends) = (1.10)($3,600,000) = $3,960,000 2. 2010 Payout = $3,600,000/$10,800,000 = 0.33 = 33% 2011 Dividends = (0.33)(2009 Net income) = (0.33)($14,400,000) = $4,800,000 (Note: If the payout ratio is rounded off to 33%, 2011 dividends are then calculated as $4,752,000.) 3. Equity financing = $8,400,000(0.60) = $5,040,000 2011 Dividends = Net income - Equity financing = $14,400,000 - $5,040,000 = $9,360,000 All of the equity financing is done with retained earnings as long as they are available. 4. The regular dividends would be 10% above the 2010 dividends: Regular dividends = (1.10)($3,600,000) = $3,960,000. The residual policy calls for dividends of $9,360,000. Therefore, the extra dividend, which would be stated as such, would be: Extra dividend = $9,360,000 - $3,960,000 = $5,400,000. An even better use of the surplus funds might be a stock repurchase. b. Policy 4, based on the regular dividend with an extra, seems most logical. Implemented properly, it would lead to the correct capital budget and the correct financing of that budget, and it would give correct signals to investors. ...
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...Andre R. Scott (D01495990) Advanced Managerial Finance – Sept 2013 - FI516 IPO Paper – Week 5 – 10/06/2013 Teacher: Miriam Benard COMPANY AND INDUSTRY Company I choose this company for two reasons; the world of information technology is huge and growing steadily. Google, Yahoo, and YouTube are hugely popular sites, and youku is a site that is similar to YouTube and delivers great possibilities for the Asian community. Youku.com, Inc. went public on December 8, 2010. This company is in the business of delivering video content over the internet. Their business model consists primarily of deriving advertising revenue as the result of viewer activity over their system. They license content and provide it for viewer use. There is no viewer fee for the service. Youku bills itself as the “leading internet television company in China.” Their mission is to become the primary source of video content for the Chinese population across any Internet-enabled device. The overall offering is somewhat like what we know as You Tube. According to iResearch, Youku has appx. 40% of the marketshare of total user time spent viewing video content online in China. Its nearest competitors have appx. 23% and 14% respectively. According to the company’s registration filing, their assessment of their strengths and opportunities is as follows: Our Competitive Strengths We believe that the following strengths contribute to our success and differentiate us from our competitors: | | ...
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...Imperva, Incorporated Steve KinKaid FI516 DeVry University Executive Summary Imperva Incorporated located at 3400 Bridge Parkway, Suite 200, Redwood Shores, California 94065, is an up and coming organization in the world of cloud computing and security they are considered best of breed. Their Initial Public Offering occurred on November 9th, 2011. The IPO price was $24.00 per share. The underwriters were granted options on an additional 750,000 shares at the then market price for 30 days. The Initial Public Offering raised $90,000,000, of which the organization received $85,500,000. The other $4,500,000 was from the sale of private stock held by company executives and was not part of the proceeds of the IPO. Currently Imperva intends to use the net proceeds received from this offering for working capital and general corporate purposes. They will invest $3.5 million of the net proceeds from this offering in Incapsula, their majority owned subsidiary, and will receive in exchange an additional 4,375,000 shares of Incapsula’s Series A-1 Preferred Stock. Business Risks of Imperva are similar to those in this segment of the industry. Some of these are; they have never been profitable, their market is rapidly evolving, competition, and if breaches occur their reputation will be harmed. Their market share is currently less than 1%. Their major competitors include companies such as Citrix , F5,IBM, McAfee, Inc., Oracle ,and Symantec. Imperva has continued to...
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