Fundamentals of Corporate Finance 3rd. Edition by Jonathan Berk, Peter DeMarzo, Jarrad Harford | 9781323363300 | Holooly

Corporate Finance

Fundamentals of Corporate Finance

145 SOLVED PROBLEMS

Question: 22.4

At the time Sprint announced plans to acquire Nextel in December 2004, Sprint stock was trading for $25 per share and Nextel stock was trading for $30 per share. If the projected synergies were $12 billion, and Nextel had 1.033 billion shares outstanding, what is the maximum exchange ratio Sprint ...

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PLAN We can use Eq. 22.4 to compute the maximum sh...

Question: 21.4

Assume you decided to purchase the September 275 through 290 put options quoted in Table 21.2 on August 21, 2013, and you financed each position by borrowing at 3% for 31 days. Plot the profit of each position as a function of the stock price on expiration. ...

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PLAN Suppose Pis the price of each put option on A...

Question: 21.2

You own a put option on Oracle stock with an exercise price of $20 that expires today. Plot the value of this option as a function of the stock price. ...

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PLAN From Eq. 21.2, and the fact that the strike p...

Question: 19.3

Your firm purchases goods from its supplier on terms of 1/15, net 40. What is the effective annual cost to your firm If it chooses not to take advantage of the trade discount offered? ...

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PLAN Using a $100 purchase as an example, 1/15, ne...

Question: 13.4

Assume the expected return on Target’s equity is 11.5%, and the firm has a yield to maturity on its debt of 6%. Debt accounts for 18% and equity for 82% of Target’s total market value. If its tax rate is 35%, what is an estimate of this firm’s WACC? ...

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PLAN We can compute the WACC using Eq. 13.7. To do...

Question: 5.3

Let’s say that you are now three years into your $30,000 car loan from the previous section and you decide to sell the car. When you sell the car, you will need to pay whatever the remaining balance is on your car loan. After 36 months of payments, how much do you still owe on your car loan? ...

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PLAN We have already determined that the monthly p...

Question: 23.6

For May 23, 2008, The Financial Times reported a spot ruble–dollar exchange rate of R23.5937/$ and a one-year forward exchange rate of R24.2316/$. At the time, the yield on short-term Russian government bonds was about 5.7%, while the comparable one-year yield on U.S. Treasury securities was 2.1%. ...

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PLAN Using the covered interest parity formula, th...

Question: 23.4

You are a U.S. investor trying to calculate the present value of a ¥10 million cash flow that will occur one year in the future. The spot exchange rate is ¥110/$ and the one-year forward rate is ¥105.8095/$. The appropriate dollar cost of capital for this cash flow is r^ast$ = 5% and the ...

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PLAN For the Japanese investor, we can compute the...

Question: 23.3

Suppose that in December 2016, the spot exchange rate for the Japanese yen is ¥116/$. At the same time, the one-year interest rate in the United States is 4.85% and the one-year interest rate in Japan is 0.10%.Based on these rates, what forward exchange rate is consistent with no arbitrage? ...

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PLAN We can compute the forward exchange rate usin...

Question: 22.3

Calculate NewWorld’s price-earnings ratio, before and after the takeover described in Example 22.2. ...

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PLAN The price-earnings ratio is price per share /...

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