1 (25 Marks) (a) In a world with no taxes, no transaction costs, and no costs of financial distress, is the following statement true, false, or uncertain? If a firm issues equity to repurchase some of its debt, the price per share of the firm’s stock will rise because the shares are less risky. Explain. (10 marks) (b) Do you agree or disagree with the following statement? A firm’s shareholders will never want the firm to invest in projects with negative net present values. Why? (10 marks)
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Evaluate the long term financing of Stemlife Company Stemlife Company’s capital structure is made up of 100% equity. It has two types of equities; ordinary stocks and retaining earning. Stemlife issues two types of stocks; stocks capital and stocks premium. There are several advantages of offering common stocks. First, by issuing common stocks the company can raise a large sum of money (Anonymous, etd). Secondly, the board of directors can decide on the amount of dividend paid to the stockholders
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When the current ratio is greater than the industry normal, this concludes the presence of redundant assets. Whereas, on the other hand, lower than the industry concludes that there is a lack of liquidity ("Ratios And Formulas In Customer Financial Analysis", 1999). The current ratio formula consists of: Current Assets/ Current Liabilities = Current Ratio (In millions) 2011 | 2012 | 13,757/ 12,088 = 1.1x | 13,709/ 12,813 = 1.0x | Based on the current ratio for the past two years, Disney current
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Plano, TX 75024 Industry: Beverages (Non-Alcoholic) Sic Code: 2080- Beverages Major Products: Canada Dry (Ginger ale,) 7-up (lemon-lime,) A&W (Root beer,) Sunkist (Orange,) and Sun Drop (Citrus.) Competitors: Coca-Cola and PepsiCo. Stock exchange: 47.33 Ticker symbol: DPS Name of outside auditors: Deloitte & Touche, LLP SIC (Standard Industry Classification): 2080 Beverages * History: Today, Dr Pepper Snapple Group is one of the leading producers of flavored beverages
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Keller All-Star Growth Fund was a medium-sized closed-end investment company and is thinking about starting using options .The analysis would be contacted for two companies stocks the AT&T, which produces telephone services and Lotus which produces software. The stock price (So) of both stocks is $55. Lotus has higher option premiums than AT&T since the daily stock price volatility is higher. PAGE 3: The main advantages of using options are: flexibility, the use of unique strategies, it’s
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section are to be included in an appendix. • Cost of Equity (Common Stock) • Beta from Regression and two Betas from analysts • Beta Chosen for CAPM and why • Capital Assets Pricing Model (include how determined RF and[ RM or (RM – RF)] • Discounted Cash Flow (DCF) (only if dividends – include how determined) • Own-Bond-Yield-plus-Judgmental-Risk-Premium (include how determine risk premium) • Cost of Preferred Stock • Cost of Debt (make sure to include table that lists all bond issues
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Monsanto Company 800 N. Lindbergh Blvd. St. Louis, MO 63167 General Inquiries: (314) 694-1000 Media Inquiries: (314) 694-NEWS (6397) Table of Contents Quantitative Analysis ………………………………..2 Performance Highlights …………………………….3 Trends……………………………………………………….4 Industry comparison………………………………….4 Qualitative Analysis……………………………………5 Sales Pitch ………………………………………………. .7 References…………………………………………………9 Monsanto Co. is a global provider of agricultural products and integrated solutions for farmers
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outage in terms of interest which is in foreign exchange. In case of convertible bond the interest rate is low (around 3 to 4 per cent) but there is exchange risk on interest as well as principal if the bonds are not converted into equity. If the stock price plummets, investors will not go for conversion but redemption. So, companies have to refinance to fulfill the redemption promise which can hit earnings. It will remain as debt in the balance sheet until conversion. It is a double whammy for
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Financial Analyst SUBJECT: Evaluation of Financial Ratios DATE: February 1st, 2013 Company G has requested an evaluation to assess the financial stability of the business based on their financial statements from 2011 and 2012. As part of the analysis standard financial ratios were used to assess the condition of various aspects of the company. These ratios were used to compare the condition of Company G as compared to industry averages. The following is a summary of the ratios used, the results
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after 5 years. Interest is payable semi-annually. Compute the value of the bond if the required rate of return is 16 per cent? II. Equity Valuation 1. The equity stock of Rax Ltd., is currently selling for Rs. 30 per share. The dividend expected next year is Rs.2 per share. The investor’s required rate of return on this stock is 15 per cent. If the constant growth model applies to Rax Ltd., what is the expected growth rate? 2. Vardhaman Ltd’s earnings and dividends have been growing at a rate
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