Question
15)The Presley Corporation is about to go public. It currently has aftertax earnings of $7,700,000, and 2,300,000 shares are owned by the present stockholders (the Presley family). The new public issue will represent 900,000 new shares. The new shares will be priced to the public at $20 per share, with a 3 percent spread on the offering price. There will also be $240,000 in out-of-pocket costs to the corporation. a.Compute the net proceeds to the Presley Corporation. (Do not round intermediate calculations and round your answer to the nearest whole dollar.)
Net proceeds$ b.Compute the earnings per share immediately before the stock issue. (Do not round intermediate calculations and round your answer to 2 decimal places.)
Earnings per share$ c.Compute the earnings per share immediately after the stock issue. (Do not round intermediate calculations and round your answer to 2 decimal places.)
Earnings per share$ d.Determine what rate of return must be earned on the net proceeds to the corporation so there will not be a dilution in earnings per share during the year of going public. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
Rate of return % e.Determine what rate of return must be earned on the proceeds to the corporation so there will be a 5 percent increase in earnings per share during the year of going public. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
Rate of return%
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Question
21)Fifteen years ago, the Archer Corporation borrowed $6,300,000. Since then, cumulative inflation has been 56 percent (a compound rate of approximately 3 percent per year). a.When the firm repays the original $6,300,000 loan this year, what will be the effective purchasing power of the $6,300,000? (Hint: Divide the loan amount by one plus cumulative inflation.) (Do not round intermediate calculations and round your answer to the nearest whole dollar.) Effective purchasing power$ b.To maintain the original $6,300,000 purchasing power, how much should the lender be repaid? (Hint: Multiply the loan amount by one plus cumulative inflation.) (Do not round intermediate calculations and round your answer to the nearest whole dollar.) Loan repayment$
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22)A $1,000 par value bond was issued 30 years ago at a 12 percent coupon rate. It currently has 25 years remaining to maturity. Interest rates on similar obligations are now 8 percent. Assume Ms. Bright bought the bond three years ago when it had a price of $1,005. Further assume Ms. Bright paid 20 percent of the purchase price in cash and borrowed the rest (known as buying on margin). She used the interest payments from the bond to cover the interest costs on the loan. a.What is the current price of the bond? Use Table 16-2. (Input your answer to 2 decimal places.) Price of the bond$ b.What is her dollar profit based on the bond’s current price? (Do not round intermediate calculations and round your answer to 2 decimal places.) Dollar profit$ c.How much of the purchase price of $1,005 did Ms. Bright pay in cash? (Do not round intermediate calculations and round your answer to 2 decimal places.) Purchase price paid in cash$ d.What is Ms. Bright’s percentage return on her cash investment? Divide the answer to part b by the answer to part c. (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.) Percentage return%
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23)A $1,000 par value bond was issued five years ago at a coupon rate of 10 percent. It currently has 8 years remaining to maturity. Interest rates on similar debt obligations are now 12 percent. Use Appendix B andAppendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods. a.Compute the current price of the bond using an assumption of semiannual payments. (Do not round intermediate calculations and round your answer to 2 decimal places.) Current bond price$ b.If Mr. Robinson initially bought the bond at par value, what is his percentage capital gain or loss?(Ignore any interest income received. Do not round intermediate calculations and input the amount as a positive percent rounded to 2 decimal places.) Percentage(Click to select)LossGain %
c.Now assume Mrs. Pinson buys the bond at its current market value and holds it to maturity, what will be her percentage capital gain or loss? (Ignore any interest income received. Do not round intermediate calculations and input the amount as a positive percent rounded to 2 decimal places.) Percentage(Click to select)LossGain % d.Why is the percentage gain larger than the percentage loss when the same dollar amounts are involved in parts b and c? The percentage gain is larger than the percentage loss because the investment is larger.The percentage gain is larger than the percentage loss because the investment is smaller.Sign up to view the entire interaction
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