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SIXTH QUIZ
FNCE 238/738
November 25, 2013
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 (12, 1:30 or 3):__________________________________
1.
On Nov. 12
th
, before the market opened, Trade Street Residential announced a rights offering:
Trade Street Residential Inc. on Nov. 12 commenced a $100 million fully backstopped common
stock rights offering to its stockholders.
The rights will have a subscription price of $6.33 per share and will be transferable.
The company said certain investment entities managed by Senator Investment Group LP agreed to
backstop the rights offering by purchasing, on the same terms, any and all shares not subscribed
through the exercise of rights
…
Under the terms of the rights offering, the company will distribute at no charge to the holders of its
common stock transferable rights to purchase up to an aggregate of approximately 15,797,788 new
shares of common stock.
The company will distribute to each such holder one transferable right for every share of common
stock owned on the record date. Each right will entitle the holder to purchase 1.3775 shares of
common stock,
…
, at a subscription price of $6.33 per share.
…
Trade Street Residential closed on Nov. 11
th
at $6.76/share.
a.
(4 pts) At what discount from TERP is this offering priced?
TERP = 6.33 + (6.76-6.33)/(1+1.3775) = 6.51
Discount = (6.51-6.33)/6.51 = 2.8%
b.
(4 pts) The offering is transferable, meaning the rights will trade separately.
Everything else
equal, what price would you expect a right to trade for?
Two ways to approach this
One way
- rights are worth cum-rights share price minus TERP = 6.76-6.51 = 0.25
Other way = 1 right buys 1.3775 shares @ $6.51-$6.33 = $0.18 profit per share, so value per right
is (1.3775)(0.18) = 0.25
2.
(8 pts) In recent IPO news, Zulily went public at 22, and then closed at $37.70 on its first day,
while Relypsa went public at 11, and closed at $12.04 on its first day.
What, if anything, do
these datapoints tell you about the relative volatility of these stocks going forward?
What is
your logic?
The empirical evidence is that aftermarket volatility increases with initial underpricing.
A logical
connection between the two is that a stock’s ex post volatility correlates with underwriters’ ex ante
uncertainty about where the stock will trade, and that underwriters respond to uncertainty by
discounting more to bring the chance of accidental overpricing down to an acceptable level.
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2.
(8 pts) An all-equity firm has existing assets and an investment opportunity that costs 5, and
everybody knows that the firm’s manager has private information about the value of each:
the
firm is either in state 1, where the assets are worth 4 and the investment opportunity pays off 6
(i.e. has an NPV of 1), or it is in state 2 where the assets are worth 13 and the investment
opportunity pays off 7 (i.e. has an NPV of 2).
The manager knows for sure which state the firm is
in, whereas everybody else puts a 50% probability on each state.
Assuming the project has to
be financed with an equity offering, would the manager finance it no matter what, i.e. whether
he knows the firm is in state 1 or instead in state 2,
if investors believe that the manager will
finance it no matter what?
Explain.
If the firm finances the project, then if it’s in state 1 it’s worth 4+6 = 10, and if it’s in state 2 it’s worth
13+7=20, so if the firm finances the project regardless of its state, then the expected value to
investors is ½(10) + ½(20) = 15.
So to raise 5, the firm needs to sell 5/15=1/3 of its equity to the new
investors, leaving 2/3 of the equity for old investors.
If the firm is in state 1, this is worth 2/3(10) =
6.67 which is greater than the 4 it is worth w/o the new project, and if it is in state 2, this is worth
2/3(20) = 13.33 > 13 it is worth w/o the new project, so the project makes the original investors
better off no matter what, if investors believe the manager finances no matter what, then the
manager does indeed finance no matter what.
4.
(6 pts) News from a couple weeks ago:
Merger doesn't suit Jos. A. Bank
Elizabeth Lazarowitz with News Wire Services
16 November 2013
New York Daily News
© 2013 Daily News, New York. All rights reserved.
Menswear retailers Jos. A. Bank and Men's Wearhouse don't seem to match. Jos. A. Bank
said on Friday it had scrapped a $2.3 billion takeover bid for its larger rival after it failed to lure
the company into merger talks.
Men's Wearhouse had rejected the $48-per-share offer in October, dismissing it as
inadequate and not in the best interest of shareholders.
The 40-year-old retailer also instituted a shareholder rights plan, known as a "poison
pill," to help prevent a hostile takeover.
Jos. A. Bank said it was still keeping the door open to a possible tie-up. It previously said
it would consider raising its bid if it seemed warranted. Hedge fund Eminence Capital, Men's
Wearhouse's largest shareholder, slammed the retailer for rebuffing Jos. A. Bank's overtures,
saying it was "disappointed." It also said it's asking regulators to permit a vote on rules that would
let shareholders boot directors from the board before the company's annual meeting.
Men's Wearhouse cut its profit forecast in September, complaining that it was being hit
by weaker consumer spending on apparel.
Just months before, it booted founder George Zimmer,
known for giving the line "You're going to like the way you look. I guarantee it," in TV
commercials, after he tussled with the board.
How could the poison pill have frustrated Jos. A. Bank’s attempted takeover
?
All I’m looking for here is how poison pills frustrate attempted takeovers, which is through a heavily
discounted rights offering to all investors except the pot
ential acquirer, triggered by the acquirer’
s
stake reaching an indicated level, such as 10%.
This rights offering hurts the acquirer by reducing the
value of his shares and also reducing their fractional voting power.
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2. In the working capital management, we know about cash conversion cycle model. For
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Concord Industries has equivalent units of 7100 for materials and for conversion costs. Total manufacturing costs are $124370. Total
materials costs are $91000. How much is the conversion cost per unit?
O $17.52.
O $4.70.
$12.82.
O $30.33
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Buddy Company uses the allowance method to account for uncollectible receivables. At the beginning of the year,
Allowance for Bad Debts had a credit balance of $800. During the year Buddy wrote off uncollectible receivables of
$2,100. Buddy recorded Bad Debts Expense of $2,800. Buddy's year-end balance in Allowance for Bad Debts is
$1,500. Buddy's ending balance of Accounts Receivable is $20,300. Compute the net realizable value of Accounts
Receivable at year-end.
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Salma wants to save money to open a tutoring center. She buys an annuity with a monthly payment of $27 that pays 3.7% interest, compounded
monthly. Payments will be made at the end of each month. Find the total value of the annuity in 10 years.
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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.
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2024 is $0).
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A process with no beginning work in process, completed and transferred out 85200 units during a period and had 50100 units in the
ending work in process inventory that were 20% complete. The equivalent units of production for the period for conversion costs were:
O 95220 equivalent units.
O 135300 equivalent units.
O 70200 equivalent units.
O 85200 equivalent units.
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Suppose you invest $120 a month for 5 years into an account earning 8% compounded monthly. After 5
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What is the Payback Period for the following investment?
Year
1
2
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4
5
O a. 3.77
Ob. 3.73
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Calculate interest using a 360-day year. If required, round your answers to the nearest cent.
Principal Interest Rate
Time
Interest
$2,700
9.6%
30 days
45 days
3,300
6.0%
80 days
3,800
10.5%
120 days
$4
5,300
150 days
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On Chapters 9, 10, and 11:
The YuRaeKa charity was established in 1960. The charity’s aim is to provide support to children from disadvantaged backgrounds who wish to take part in sports such as tennis, badminton, squash, basketball and football.
YuRaeKa has a detailed constitution[1] which explains how the charity’s income can be spent. The constitution also notes that administration expenditure cannot exceed 10% of income in any year.
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Consider the following situations for Shocker:
1. On November 28, 2024, Shocker receives a $3,450 payment from a customer for services to be rendered evenly over the next
three months. Deferred Revenue was credited on November 28.
2. On December 1, 2024, the company paid a local radio station $2,490 for 30 radio ads that were to be aired, 10 per month,
throughout December, January, and February. Prepaid Advertising was debited on December 1.
3. Employee salaries for the month of December totaling $7,300 will be paid on January 7, 2025.
Hint
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Record the necessary adjusting entries for Shocker at December 31, 2024. No adjusting entries were made during the year. (If no
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Consider the following situations for Shocker:
1. On November 28, 2024, Shocker receives a $3,450 payment from a customer for services to be rendered evenly over the next
three months. Deferred Revenue was credited on November 28.
2. On December 1, 2024, the company paid a local radio station $2,490 for 30 radio ads that were to be aired, 10 per month,
throughout December, January, and February. Prepaid Advertising was debited on December 1.
3. Employee salaries for the month of December totaling $7,300 will be paid on January 7, 2025.
Hint
Required:
Record the necessary adjusting entries for Shocker at December 31, 2024. No adjusting entries were made during the year. (If no
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ring the first month of operations, Johnson Services, Ic., completed the following transactions:
(Click the icon.to view the transaction data.)
ead the requirements.
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Lequirement 1. Record each transaction in the
Mar 2: Johnson Services received $62,000 cash
Mar 2 Johnson Services received $62,000 cash and issued common stock to the
Journal
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Accounts
3 Purchased supplies, $600, and equipment, $11,400 on account.
Date
4 Performed services for a customer and received cash, $5,500.
7 Paid cash to acquire land, $38,000.
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Round your answers to two decimal places, if necessary.
At the beginning of each of the last three years, Lucas put $7,000 from his earnings as a waiter into a
college savings account that earned 1.7% interest compounded annually. Now he will spend an
estimated $21,600 to attend his local community college for 2 years and not take out a student loan.
Complete the table to determine whether Lucas has saved enough money to attend community college.
2
3
Year
1
Beginning balance
$0
Amount deposited
$7,000
$7,000
$7,000
New balance
$7,000
$
Amount of interest earneds
Ending balance
$
Lucas (select)
v enough money to attend community college.
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- 17.39 .. 90 PROBLEMS OF SEMESTER FINAL TEST 2021 Word es Mailings Review View Help O Tell me what you want to do Aa - AaBbCeDd AaBbCcl AaBbCcDe AaBbCcDe AaBt Heading 2 Heading 3 T Normal I No Spac. Headin Paragraph Styles 4.5.6 7 8.. 9. • 10. 11 12. 13. 14. 15.I Thursday : January 21, 2021 --- 80 Minutes 1. In this section we examine three theories of investor preference: The dividend irrelevance theory. The "bird in the hand" theory, the tax preference theory, which theory is the best? What is the different of stock dividends, stock splits, and stock repurchase. 2. In the working capital management, we know about cash conversion cycle model. For problem if average inventories are $3 million and sales are $11 million. If receivables are S 657.535 and sales are S 11 million. Then, if its cost of goods sold are $9 million per year and if its accounts payable average $ 657.535. What is the length of the cash conversion sicle? 3. The ELGRAJO Corporation has capital structure as follow…arrow_forwardA 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 %24arrow_forward+V My Questions | bartleby b References Chapter 3 Quiz Camden County College camdenccinstructure.com/courses/3788/assignments/35967?module_item id=88693| Next> K Prev Send to Gradebook Submitted to Gradebook, Fri, Oct 4, 2019, 9:34:35 AM (America/New York -04:00) --/1 Question 15 View Policies Current Attempt in Progress Concord Industries has equivalent units of 7100 for materials and for conversion costs. Total manufacturing costs are $124370. Total materials costs are $91000. How much is the conversion cost per unit? O $17.52. O $4.70. $12.82. O $30.33 eTextbook and Media Submit Answer Save for Later Attempts: 0 of 1 used 11:10 A 10/4/20 hp ins prt sc end home f12 11 DI delete f9 f8 f7 f6 fs 10 + & % num backspace 6 7 lock 5 { P T U Y II 96arrow_forward
- ccounting | Spring 2023 uiz Course Home - kar X K Chapter 9 Quiz OA. $18,200 OB. $18,800 OC. $17,500 O D. $20,300 mylab.pearson.com Question 5 of 10 X G At year-end, Snow 0 4 kara harper 04/09/23 10:36 AM This quiz: 10 point(s) possible This question: 1 point(s) possible ? Submit quiz Buddy Company uses the allowance method to account for uncollectible receivables. At the beginning of the year, Allowance for Bad Debts had a credit balance of $800. During the year Buddy wrote off uncollectible receivables of $2,100. Buddy recorded Bad Debts Expense of $2,800. Buddy's year-end balance in Allowance for Bad Debts is $1,500. Buddy's ending balance of Accounts Receivable is $20,300. Compute the net realizable value of Accounts Receivable at year-end.arrow_forward#5 is the questionarrow_forward5:42 AM Tue Nov 16 * 100% www-awu.aleks.coma Exam 2, 7.3-9.4 REVIEW Report Overall Assignment Score: 73% (Best Score) Ninotchka V Score. O O pont Submitteu. NOV Z 7.32 1 IVI Tme Spet. S s Español Incorrect Your answer is incorrect. Salma wants to save money to open a tutoring center. She buys an annuity with a monthly payment of $27 that pays 3.7% interest, compounded monthly. Payments will be made at the end of each month. Find the total value of the annuity in 10 years. Do not round any intermediate computations, and round your final answer to the nearest cent. If necessary, refer to the list of financial formulas. 圖 Answer Submitted: 00 $12345.92 Correct Answer: $3913.49 Assignments List EVEI IVIUIawll LLC. All Rights Reserved. Terms of Use Privacy Center Accessibility IIarrow_forward
- Hey I was wondering if I can get help with this thank youarrow_forwardMc 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…arrow_forwardP7arrow_forward
- Eat min C e New tab Λ Content xW Quiz 3-MAT-143, section 03F, Fa X + Q A ✩ https://www.webassign.net/web/Student/Assignment-Responses/last?dep=34832472 Viewing Saved Work Revert to Last Response DETAILS MY NOTES You deposit $850 in an account paying an annual simple interest rate of 7.8%. Find the future value of the investment (in dollars) after 1 year. DETAILS MY NOTES Calculate the simple interest due (in dollars) on a 40-day loan of $1,600 if the annual interest rate is 9%. (Use 360 days in 1 year.) $ DETAILS MY NOTESarrow_forwardMy Questions | bartleby b + Camden County College References Chapter 3 Quiz Ha X //camdenccinstructure.com/courses/3788/assignments/35967?module item id=88693 Next> Send to Gradebook < Prev Submitted to Gradebook, Fri, Oct 4, 2019, 9:34:35 AM (America/New York -04:00) Question 19 -/1 View Policies Current Attempt in Progress A process with no beginning work in process, completed and transferred out 85200 units during a period and had 50100 units in the ending work in process inventory that were 20% complete. The equivalent units of production for the period for conversion costs were: O 95220 equivalent units. O 135300 equivalent units. O 70200 equivalent units. O 85200 equivalent units. eTextbook and Media Attempts: 0 of 1 used Submit Answer Save for Later 11:21 AM 10/4/2019 hp ins prt sc 12 end 11 home f10 delete fg f8 f5 f4 II & num backspace 6 5 lock } { P T U Y home + 96arrow_forwardQuiz 4: Module 4- Requires Respondus L Started: Nov 16 at 6:41am Quiz Instructions Quiz 4 covers the content from Module 4. The quiz has a 45-minute timer t question at a time but you can go back and change your answers if you nee Quiz answers can be viewed for 72 hours after the final due date, Be sure to Question 17 An anecdote is a type of analogy | metaphor Sumile comparison example Previousarrow_forward
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