Weighted Average Cost of Capital (WACC)-In Class Weir Enterprises Balance Sheet is listed below. The preferred stock currently sells for $15 per share and pays a $1.50 dividend. There are one million common shares outstanding and the stock sells for $30 per share. The common stock has a beta of 1.3, the expected return on the market is 12 percent and the risk-free rate is 4 percent. The bonds pay an 8 percent coupon annually. The bonds have 10 years left to maturity and are currently priced
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QUESTIONNAIRE ON VALUING STOCKS By: Bahae eddine Boussouf Nadezda Vovk 1) Common stock: a share of ownership in the corporation, which confers rights to any common dividends as well as rights to vote on election of directors, mergers, or other major events. Preferred stock: A class of ownership in a corporation that has a higher claim on the assets and earnings than common stock. Preferred stock generally has a dividend that must be paid out before dividends to common stockholders and the
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weights and current problems of procedures for estimating the costs of debt and equity. When Peter Vanderhein was in college as a business student, he found that most shops managed by his uncle did not operate properly by inefficiency in excessive stocks of some items, shortages, late payments and etc. Peter Vanderhein took over shops from his uncle and started Ace Repair, Inc in 1979. After he adopted the new managerial system based on computers and software and he trained his employees in the use
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INTERMEDIATE ACCOUNTING 2 of 3 MIDTERM EXAM Pick 7 problems that you will do. Each problem is worth 14 points. Please put your answer in the space provided, any back up can be attached at the end of the exam as long as it is clearly labeled . Your work can be done by hand as long as it is legible. Select the 7 problems you are completing: 1, 4, 5, 9, 10, 11, 12 Problem 1—Accounts and Notes Payable. Described below are certain transactions of Larson Company for 2010: 1. On May
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weights hold, in terms of the WACC. The first task to be completed was to determine which components made up the capital structure of Ace and how the company weighted their system. Within this information we were able to compile the debt, preferred stock, and common equity that created the company’s capital structure. After computing these statistics it is apparent that there has to be a decision made in order to choose the cost and weight that should be assigned to retained earnings. The
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issuance of different stocks by corporations is a topic that we are getting a better understanding of through reading the text and studying the Wiley plus texts. Authorized stock is the amount of stock that a corporation is authorized to sell as indicated in its charter, and within that broad spectrum are many different kinds of stock that the corporation can chose to sell. Examples of those stocks are par-value stock and no-par value stock. A par value stock is capital stock that has been assigned
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IP-4 Capital | Debt 50% | Equity 50% | Bonds | 4% | C. Stock (20) | 12% | tax | 40% | P. Stock (30) | 6% | The common stockholders have an expected return of 12%, preferred stockholders have an expected return of 6%, and the firm's bondholders purchased the firms bonds at a yield to maturity (YTM) of 4%. The firm's tax rate is 40%. Common stock $2,000,000 Preferred stock $3,000,000 Long-term debts (bonds)
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Valuation of Future Cash Flows 8. Stock Valuation © The McGraw−Hill Companies, 2002 273 CHAPTER Stock Valuation 8 When the stock market closed on July 3, 2001, the common stock of McGrawHill, publisher of fine-quality college textbooks, was going for $67.40 per share. On that same day, stock in General Motors (GM), the world’s largest automaker, closed at $64.72, while eBay, the on-line auction company, closed at $69.16. Since the stock prices of these three companies were so
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firm takes on the assets and liabilities of the selling firm. PURCHASE: Purchasing firm pays for all the assets or all the stock of the selling firm. Distinction between a purchase and a merger depends on the final position of the shareholders of the constituent firms. TAKEOVER: A stock purchase offer in which the acquiring firm buys a controlling block of stock in the target. This enables purchasers to elect the board of directors. Both hostile and friendly takeovers exist. FREEZE-OUTS
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Owner’s Equity As of December 31, 2010 PROBLEM 4 (20 POINTS) 1. Compute Basic EPS (show computations): (5 points) 2. Identify whether either (or both) the preferred stock and bonds are potentially dilutive. Support your answer with computations. (10 points) 3. Compute Diluted EPS. (5 points) PROBLEM 5 (25 POINTS) 1. Prepare all 2010 entries for
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