Fundamentals of Corporate Finance by Jonathan B Berk, Peter M DeMarzo,. Jarrad Harford | 9781292018409 | 1292018402 | Holooly

Corporate Finance

Fundamentals of Corporate Finance

137 SOLVED PROBLEMS

Question: 14.3

Fleming Educational Software, Inc., is selling 500,000 shares of stock in an auction IPO. At the end of the bidding period, Fleming’s investment bank has received the following bids: What will the offer price of the shares be? ...

Verified Answer:

PLAN First, we must compute the total number of sh...

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 ...

Verified Answer:

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

Question: 19.4

Your company currently sells its product with a 1% discount to customers who pay cash immediately. Otherwise, the full price is due within 30 days. Half of your customers take advantage of the discount. You are considering dropping the discount so that your new terms would just be net 30. If ...

Verified Answer:

PLAN To decide whether to change your policy, comp...

Question: 19.5

Financial Training Systems (FTS) bills its accounts on terms of 3/10, net 30. The firm’s accounts receivable include $100,000 that has been outstanding for 10 or fewer days, $300,000 outstanding for 11 to 30 days, $100,000 outstanding for 31 to 40 days, $20,000 outstanding for 41 to 50 days, ...

Verified Answer:

PLAN An aging schedule shows the amount and percen...

Question: 21.6

You are an options dealer who deals in non-publicly traded options. One of your clients wants to purchase a one-year European call option on HAL Computer Systems stock with a strike price of $20. Another dealer is willing to write a one-year European put option on HAL stock with a strike price of ...

Verified Answer:

PLAN We can use put-call parity to determine the p...

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. ...

Verified Answer:

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

Question: 21.1

It is August 21, 2013, and you have decided to purchase 10 September call contracts on Amazon’s stock with an exercise price of $285. Because you are buying, you must pay the ask price. How much money will this purchase cost you? Is this option in-the-money or out-of-the-money? ...

Verified Answer:

PLAN From Table 21.2, the ask price of this option...

Question: 23.7

Camacho Enterprises is a U.S. company that is considering expanding by acquiring Xtapa, Inc., a firm in Mexico. The acquisition is expected to increase Camacho’s free cash flows by 21 million pesos the first year; this amount is then expected to grow at a rate of 8% per year. The price of the ...

Verified Answer:

PLAN We can calculate the NPV of the expansion in ...

Question: 22.3

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

Verified Answer:

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

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%. ...

Verified Answer:

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

Loading...