Principal of Finance Accounting Worksheet

User Generated

ivetvy04

Business Finance

Description







8- The Burma Hat Company's warrant is trading for $10.20. The warrant carries the option to purchase two shares of common stock for $48. What is the speculative premium if the stock price is $51.30?

  • $3.60
  • $3.30
  • $6.60
  • $10.20

9- How much must you invest today at 10% interest in order to see your investment grow to $12,000 in 3 years?

  • $7,320
  • $9,012
  • $17,052
  • $8,532

10- Firm X has a tax rate of 29%. The price of its new preferred stock is $65 and its flotation cost is $2.00. The cost of new preferred stock is 12%. What is the firm's dividend? (Round your answer to 2 decimal places.)

  • $7.56
  • $9.01
  • $6.21
  • $9.71


11- Ambrin Corp. expects to receive $5,000 per year for 13 years and $6,500 per year for the next 13 years. What is the present value of this 26 year cash flow? Use an 9% discount rate. Use Appendix D

 and Appendix B
 to calculate the answer. (Round your intermediate calculations to the nearest dollar value.)
  • $53,300
  • $86,101
  • none of these
  • $64,531

12- The "floor" or pure bond value of a convertible bond is found by

  • multiplying the price of the firm's common stock by the conversion ratio and adding the present value of the bond's face value.
  • adding the present value of the bond's interest payments to the present value of the bond's face value.
  • multiplying the bond's conversion premium by the price of the firm's common stock
  • multiplying the price of the firm's common stock by the conversion ratio.

13- Which of the following characteristics are drawbacks of convertible bonds?

Conversion may be forced on the bondholder by call provisions on the convertible bond.

  • Downside protection has minimal effectiveness if the bond is bought at a large premium over floor value.
  • Interest rates on the debt-instrument part of a convertible bond are frequently below market interest rates.
  • All of these options are drawbacks of convertibles.

14- Which of the following is true?

  • As the price of common stock increases, the conversion value and the floor price increase.
  • As the price of common stock increases, the market price of a convertible bond and the conversion value increase.
  • Two of the options are true.
  • As the price of common stock increases, the market price of a convertible bond and the conversion premium increase.

15- A firm's preferred stock pays an annual dividend of $2, and the stock sells for $71. Flotation costs for new issuances of preferred stock are 7% of the stock value. What is the after-tax cost of preferred stock if the firm's tax rate is 35%? (Round your answer to 2 decimal places.)

  • 1.68
  • 4.48
  • 3.03
  • 5.18





 

Explanation & Answer:
1 Worksheet
User generated content is uploaded by users for the purposes of learning and should be used following Studypool's honor code & terms of service.

Explanation & Answer

At...


Anonymous
Awesome! Made my life easier.

Studypool
4.7
Trustpilot
4.5
Sitejabber
4.4

Related Tags