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THIRD QUIZ FNCE 238/738 February 27, 2012 WRITE ALL ANSWERS ON THE TEST. IF YOUR ANSWER CONTINUES ON THE BACK, MAKE A NOTE OF IT ON THE FRONT. 30 PTS / 25 MINUTES NAME:_____________________________________________ SECTION (10:30, 12, 1:30):__________________________________

1. (8 pts) You are an entrepreneur with two potential projects, A and B , which each cost 100, and which have the following payoffs in Depression ( D ) and Prosperity ( P ), each of which has probability ½: D P A 60 140 B 80 130 You want to raise money toward the cost of 100 by issuing a bond with face value 100, to be paid out of the project’s payoffs. Whatever the bond issue doesn’t raise, you will pay in yourself, and you get the equity claim on the project. You cannot commit to which project you will choose after issuing the bond. You are considering adding a clause to the bond contract which allows the bondholders to liquidate the project immediately after you choose it, and pay themselves off out of the proceeds. Would such a clause help? Does it depend on how much they can liquidate the project for? Be precise. The clause helps if it causes the manager to choose the higher-value project. Since the expected payoff of B is 105 and the expected payoff of A is 100, B is the higher-value project. If the bond has a face value of 100, then To Bond To Equity A ½(60)+½(100)= 80 ½(0)+ ½(40)=20 B ½(80)+ ½(100)=90 ½(0)+ ½(30)=15 So as it stands, equity will choose A (and thus pays in 100-80=20 for payoff of 20). However, if the project liquidates for between 80 and 90, then bondholders will liquidate if A is chosen but not if B is chosen, so the entrepreneur chooses B (and thus pays in 100-90=10 for a payoff of 15). If the project liquidates for less than 80 then it has no effect, and if it liquidates for more than 90 then bondholders always liquidate, so no value is created.

2. (8 pts) Metrobank has $100BB in deposits, and in 1 year its assets will be worth either $80BB, with probability ¼, or $120BB, with probability ¾. The government wants Metrobank to raise $20BB with an equity offering, so that its assets will cover its deposits no matter what. Would Metrobank do this voluntarily, or would they have to be forced? Explain. As it stands, Metrobank’s equity is worth ¼(0) + ¾(20) = 15. If it were worth 20 more, so that it is worth either 100 or 140 in a year, then the equity would be worth ¼(0) + ¼(40) = 30. So the new shares would be 2/3 of all shares, in order to be worth 2/3(30)=20, and the old shares would be the remaining 1/3, thus worth 1/3(30)=10. This is less than the 15 they are currently worth, so they would not voluntarily raise this equity. They would have to be forced.

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3. From the Feb. 21, 2012 Stamford Advocate: The Stamford office of Grubb & Ellis learned in one fell swoop on Tuesday that its parent company filed for bankruptcy and might have sold the Connecticut operation to the publicly traded financial firm BGC Inc. … The Santa Ana, Calif.-based company said the downturn in the U.S. real estate market from 2007 to 2009 caused losses that severely strained its liquidity and hampered its ability to keep operating, according to a court filing. Grubb & Ellis failed to find a buyer outside the bankruptcy process, Chief Financial Officer Michael Rispoli said in the filing. … As part of the deal, BGC will provide a loan of as much as $4.8 million to Grubb & Ellis to keep it operating during the bankruptcy process, Rispoli said. a. (4 pts) What might explain why Grubb & Ellis is being purchased this way?  An out-of-bankruptcy purchase risks being viewed ex-post as a fraudulent conveyance  Out-of-bankruptcy purchases can also bring hidden liabilities  Going into bankruptcy and using the Section 363 auction procedure addresses both these risks: the asset is purchased free and clear of liabilities, and it won’t be viewed ex -post as a fraudulent conveyance b. (4 pts) Cons idering G&E’s considerable existing indebtedness, how can BGC expect to be repaid on this $4.8 million loan? The bankruptcy code allows post-petition borrowing to be treated as an administrative expense, thereby enjoying seniority over all pre-petition debt except the collateralized debt, up to the value of the collateral. (could also mention that if necessary, it can enter senior to the collateralized debt if the court views the collateralized debt as adequately protected).

4. (6 pts) The T. Rowe Price Tax-Exempt Money Fund reports a shadow price, as of 11/30/2011, of $1.0007/share. Why does T. Rowe track this shadow price, and what does it mean for investors who sold their shares on 11/30/2011? The shadow price is the true mark-to-market value per share, as opposed to the $1 share price at which investors come and go, as long as the buck isn’t broken. T. Rowe has to track the shadow price because if the mark-to-market value, rounded off to the nearest penny, ceases to be $1, then T. Rowe must break the buck. That the shadow price is not exactly a dollar on 11/30/11 means nothing to investors who sold their shares that day; they’ll get $1 for their shares. (For the investors who remain, it means a tiny gain, in that investors just left the fund for less than the true value of their shares, which inflates, by this small amount, the value per share for investors who remain).

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A Final Exam - MATH 1330 - Math b Details | bartleby E New tab A https://www.webassign.net/web/Student/Assignment-Responses/submit?dep=254878928tags=autosave#question4023958_1 Sign in 12. DETAILS HARMATHAP12 6.2.009. MYΝΟΤΕS What are the future value and the interest earned if $4000 is invested for 3 years at 8% compounded quarterly? (Round your answers to the nearest cent.) future value 24 interest earned %24

все Google Chrome - D... My Learning Progre... N Northwestern Univ... Solution Manual Fo... Business Law Question 28 of 40 View Policies Show Attempt History < Current Attempt in Progress X Your answer is incorrect. 0/0.3 Your grandfather has agreed to deposit a certain amount of money each year into an account paying 7.90 percent annually to help you go to graduate school. Starting next year, and for the following four years, he plans to deposit $2,350, $8,600, $7,200, $6,600, and $12,150 into the account. How much will you have at the end of the five years? (Round answer to 2 decimal places, e.g. 15.25.) Future value at end of five years eTextbook and Media Save for Later Using multiple attempts will impact your score. 20% score reduction after attempt 2 Q Search 41719.11 GUND Attempts: 1 of 3 used Submit Answer

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Mc Graw Hill M Question 5 - Week 11 - Homework #7 (100 points) - Connect Week 11 - Homework #7 (100 points) 110 ezto.mheducation.com bSuccess Confirmation of Question Submission | bartleby Saved 10 5 points eBook Fighting Irish Incorporated pays its employees $3,360 every two weeks ($240/day). The current two-week pay period ends on December 28, 2024, and employees are paid $3,360. The next two-week pay period ends on January 11, 2025, and employees are paid $3,360. Required: 1. Record the adjusting entry on December 31, 2024. 2. Calculate the 2024 year-end adjusted balance of Salaries Payable (assuming the balance of Salaries Payable before adjustment in 2024 is $0). Print Complete this question by entering your answers in the tabs below. References Required 1 Required 2 Calculate the 2024 year-end adjusted balance of Salaries Payable (assuming the balance of Salaries Payable before adjustment in 2024 is $0). Ending balance hwo to ss on macbook - Google Search Help Save & Exit…

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F myCampus Portal Login - for Stu X B 09 Operational and Legal Consid x E (24,513 unread) - sharmarohit81 b My Questions | bartleby A fleming.desire2learn.com/d21/le/content/130754/viewContent/1518900/View?ou=130754 Table of Contents > Week 9: Operational and legal Considerations > Lecture Notes > 09 Operational and Legal Considerations 09 Operational and Legal Considerations - > Calculating Capacity • How many machines do you need? • You expect your sales to be 3,000,000 granola bars (20g each) • How large is your plant? per month • How many workers do you need? The machine: • How much is the investment? Capacity: 100 kgs per hour • What are the operating costs? Requires 2 people to operate it Takes 8 ft x 40 ft space • Cost per machine $15,000 Energy and maintenance: $5 per hour • Cost of material and packaging: $0.12 per bar I Group Project.xlsx Show all 12:35 AM O Type here to search A O 4) ENG 2020-12-09

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