Fundamentals of Corporate Finance by Stephen A. Ross, Randolph Westerfield, Bradford D. Jordan | 9781259918957 | 1259918955 | Holooly

Corporate Finance

Fundamentals of Corporate Finance

185 SOLVED PROBLEMS

Question: 3.5

Take a look at the most recent numbers reported for Cost of Sales/Inventory and EBIT/ Interest in Table 3.13. What are the overall median values? What are these ratios? ...

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If you look back at our discussion, you will see t...

Question: 24.1

Looking at Table 24.1, suppose you buy 10 CSCO January 25 put contracts. How much does this cost (ignoring commissions)? Just before the option expires, CSCO is selling for $21.50 per share. Is this good news or bad news? What is your net profit? ...

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The option is quoted at $.76, so one contract cost...

Question: 13.2

Going back to Example 13.1, what are the variances on the two stocks once we have unequal probabilities? The standard deviations? ...

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We can summarize the needed calculations as follow...

Question: 13.4

In Example 13.3, what are the standard deviations on the two portfolios? ...

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To answer, we first have to calculate the portfoli...

Question: 15.3

In Example 15.2, suppose the rights sell for only $2 instead of the $2.50 we calculated. What can you do? ...

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You can get rich quickly because you have found a ...

Question: 19.3

Look back at Example 19.2. A large bank is willing to provide the float reduction service for $175 per year, payable at the end of each year. The relevant discount rate is 8 percent. Should Lambo hire the bank? What is the NPV of the investment? How do you interpret this discount rate? What is the ...

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The PV to Lambo is still $2,000. The $175 would ha...

Question: 20.4

Based on our previous two examples, what size orders should Thiewes place to minimize costs? How often will Thiewes restock? What are the total carrying and restocking costs? The total costs? ...

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We know that the total number of pairs of boots or...

Question: 19A.1

The Vulcan Corporation has cash outflows of $100 per day, seven days a week. The interest rate is 5 percent, and the fixed cost of replenishing cash balances is $10 per transaction. What is the optimal initial cash balance? What is the total cost? ...

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The total cash needed for the year is 365 days × $...

Question: 18.2

You have collected the following information for the Slowpay Company: Credit sales for the year just ended were $50,000, and cost of goods sold was $30,000. How long does it take Slowpay to collect on its receivables? How long does merchandise stay around before it is sold? How long does Slowpay ...

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We can first calculate the three turnover ratios: ...

Question: 16.4

This is a comprehensive example that illustrates most of the points we have discussed thus far. You are given the following information for the Format Co.: EBIT = $126.58 TC = .21 D = $500 RU = .20 The cost of debt capital is 10 percent. What is the value of Format’s equity? What is the cost of ...

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This one’s easier than it looks. Remember that all...

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