transfers two financial assets, its investments in the Series A and Series B preferred stock of Tip-Top, to InsureAll, a substantive third party (i.e., the transaction does not involve a qualifying special-purpose entity (QSPE)). The Series A and Series B preferred stock are traded publicly (i.e., they are readily obtainable in the marketplace). DrugKing holds a call option, written by InsureAll, on the Series A preferred stock, which will allow it to repurchase the asset from InsureAll two years after
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formula for WACC. WACC = wd*kd(1 - T) + wps * kps + wce * kcs wd = weight of debt, kd = cost of debt, T = tax rate, wps = weight preferred stock. kps = cost preferred stock, wce = weight common stock, kcs = cost common stock. Retained earnings and the sale of new common stock are both used in regard to common equity. 2) What are three methods for estimating common stock cost from retained earnings? Capital-asset-pricing-model (CAPM) approach Bond-yield-plus-premium approach Discounted cash
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Years of Screening and Signaling’ 99 Riley – 2001 2 101 Harris & Raviv (1990) ‘Capital Structure and the Informational Role of Debt’ 106 Harris & Raviv (1990) 2 108 Harris & Raviv – 1990 3 109 Heinkel & Zechner (1990) ‘The Role of Debt and Preferred Stock as a Solution to Adverse Investment Incentives’
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definition of capital structure is a “combination of a company’s long term debt, specific short term debt, common equity, and preferred equity, the capital structure is the firm’s various sources of funds use to finance its overall operations and growth. Debt comes in the form of bond issues or long-term notes payable, whereas equity is classified as common stock, preferred stock, or retained earnings. Short-term debt such as working capital requirements also is considered part to the capital structure
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P11-26A Requirement 1 Louis Welch | Payroll for the year ended December 31, 2014 | | Calculation | Annual | Gross Pay: | | | Salary | $10,200 × 12 | $ 122,400 | Bonus | $122,400 × 10% | 12,240 | Total Gross Pay | | $ 134,640 | | | | Deductions: | | | Federal Income Tax | ($850 × 12) + $924 | $ 11,124 | State Income Tax | ($70 × 12) + $40 | 880 | FICA—OASDI | 4.2% first 110,100 | 4,624 | FICA—Medicare | 1.45% × $134,640 | 1,952 | Charity Fund | 1% × 134,640
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that, for a stock, shows ownership in a firm; for a bond, indicates a creditor relationship with a firm or with a federal, state, or local government; or signifies other rights to ownership. 2. Collateral used to guarantee repayment of a debt. Stock An ownership share or ownership shares in a corporation. See also bearer stock, common stock, preferred stock, stock class. Common stock A class of capital stock that has no preference to dividends or any distribution of assets. Common stock usually conveys
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| FIN-516 Week 2 - MINI – CASE ASSIGNMENT | Deere & Company (NYSE:DE) | | A fundamental Analysis into the financial performance of Deer and Company (NYSE :DE ), better known as JOHN DEERE & CO. | FIN-516 – WEEK 2 – MINI – CASE ASSIGNMENT Deere & Company (NYSE:DE) 1. What is the name of the company? What is the industry sector? Deere & Company also more commonly known as John Deere, along with its subsidiaries, operates in three segments: agriculture and
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manufactures, develops, licenses, sells and supports consumer electronics, computer software, services and personal computers. Bill Gates and Paul Allen initiated this Company way back in 1975. My client wishes to invest in Microsoft. Analyzing Microsoft stock and financial performance is critical to allow me advice my client appropriately. 2.0 An Overview of Microsoft Corporation Microsoft is best known for its software products such as the line of operating systems, Microsoft Windows, Internet
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percent of your money in the old portfolio and 15 percent in a stock with a beta of 4.5? Ans – 3.31 2. PNB Industries has 20 million shares of common stock outstanding with a market price of $18.00 per share. The company also has outstanding preferred stock with a market value of 50 million, and $500,000 bonds outstanding, each with face value $1,000 and selling at 97% of par value. The cost of equity is 15%, the cost of preferred is 12% and the cost of debt is 8.50%. If PNB’s tax rate is 40%
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firm? Maximize shareholder wealth Explanation: Every for-profit is held accountable to shareholders above all else. 2) What would be considered a primary market transaction? The issue of new common stock by a public company Explanation: When a company issues NEW stock it is considered the primary market, while all subsequent transactions are considered the secondary market. 3) Who represents the principles of an organization based on the agency problem theory? Shareholders
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