After successfully completing your corporate finance class, you feel thenext challenge ahead is to serve on the board of directors of SchenkelEnterprises. Unfortunately, you will be the only individual voting for you.If Schenkel has 250,000 shares outstanding, the stock currently sells for$17, and there are five seats in the current election, how much will it costyou to buy a seat? (Note: Use cumulative voting)$850,017O $1,062,517O $2,590,037O $2,125,017O $708,350

In cumulative system there are multiple seats to be elected and each voter will cast number of votes…

Answered: After successfully completing your…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Finding the WACC. Monica is the CFO of Cooking for Friends (CFF) and uses the pecking order hypothesis philosophy when she raises capital for company projects. Currently, she can borrow up to $450,000 from her bank at a rate of 7.75%, float a bond for $800,000 at a rate of 10%, or issue additional stock for $1,500,000 at a cost of 15%. What is the WACC for CFF if Monica chooses to invest A. $900,000 in new projects? B. $200,000 in new projects? C. $2,750,000 in new projects?
Scenario 1.Your grandparents gave you ₱ 175,000.00 on your 16th birthday. You wereinstructed to invest the money so that the earnings can be used to pay for yourtuition fee in college. Having heard about the risks and rewards of the stockmarket from your parents, you become interested in buying stocks in aparticular company. Below are the options given to you by your parents:Option1: Company ABC’s selling stock is ₱ 1,500.00 per share that will have adividend of ₱ 200.00 per year. The stock can be sold after two years at ₱2,000.00and the market requires a rate of return of 15%.Option2: Company XYZ’s selling stock is ₱ 1,000.00 per share that will have adividend of ₱ 180.00 per year. The stock can be sold after two years at ₱2,000.00and the market requires a rate of return of 7%.In which company will you invest your money? Why?
2. An analyst for Acme, R. Runner, has recommended that Peter the Anteater purchase shares in a private firm (a firm that is not traded on any exchange) called Dynamite Corp. Dynamite has 30% debt and 70% equity. R. Runner believes that Dynamite will generate a return of 10% over the next year. Since Y. Lee is new to the job, he decides to do a little research on his own. He finds a company, Explosions Unlimited, that has very similar business as Dynamite. Explosions has an equity beta of 1.05 and is composed of 40% debt and 60% equity. Should Peter the Anteater buy the stock? The expected return on the market is 12% and the expected risk-free rate is 5%.
When you bought 300 shares of Tesla at $100/ share and 3 years later it is trading at $150/share and you are still holding onto it, hoping it may still increase in value; So you have not sold it yet in anticipation of the stock price rising even higher, what is your tax liability in year 3 O The difference between where you bought it and where it is currently trading O The $50 gain times the 300 shares you are holding O It depends on what happened in year 2 O None
Pls show complete steps and all parts or skip
John Tye has just been hired as the new corporate finance analyst at I-Ell Enterprises and has received his first assignment. John is to take the $25 million in cash received from a recent divestiture and use part of these proceeds to retire an outstanding $10 million bond issue and the remainder to repurchase common stock. However, the bond issue cannot be retired for another two years. If John can place the funds necessary to retire this $10 million debt into an account earning 6 percent compounded monthly,how much of the $25 million remains to repurchase stock?
Your grandparents gave you ₱175,000.00 on your 16th birthday. You were instructed to invest the money so that the earnings can be used to pay for your tuition fee in college. Having heard about the risks and rewards of the stock market from you parents, you become interested in buying stocks in a particular company. Below are the options given to you by your parents Option 1: Company ABC’s selling stock is ₱1,500.00 per share that will have a dividend of ₱200.00 per year. The stock can be sold after two years at ₱2,000.00 and the market requires a rate of return of 15%. Option 2: Company XYZ’s selling stock is ₱1,000.00 per share that will have a dividend of ₱180.00 per year. The stock can be sold after two years at ₱2,000.00 and the market requires a rate of return of 7%. In which company will you invest your money? Why?
) Your firm has the following structure: you own all the shares of the Dixit paper cup company. Dixit has $2,000,000 of outstanding perpetual debt with a 10% coupon selling at par. Dixit is currently selling paper cups which produce earnings before interest of $210,000 per year. You receive the following offer from your engineer friend. He would help you liquidate Dixit’s assets and with the proceeds you could build solar powered scooters. Your financing would remain the same. You believe that there is a 75% chance that solar powered scooters would not be particularly successful. In this case they would generate only $100/year. However, there is a 25% chance that solar powered scooters would be very successful. In this case they would generate $500,000 per year. Assume your equity discount rate is 15%. Assume the firm pays no taxes. b) What is the value of the solar powered scooters investment assuming a 15% discount rate? c) What is the value of your equity under each of these…
Your eccentric Aunt Claudia has left you $50,000 in BP shares plus $50,000 cash. Unfortunately, her will requires that the BP stock not be sold for one year and the $50,000 cash must be entirely invested in one of the stocks shown below. BHP Billiton BP Siemens Nestlé Sony Sanofi Agricultural Bank Standard deviation, % Agricultural BHP Billiton BP 1.00 Siemens Nestlé Sony Sanofi Bank 0.44 0.21 -0.05 0.21 0.15 0.24 1.00 0.40 0.24 0.27 0.36 0.27 1.00 0.26 0.33 0.29 0.21 1.00 0.34 0.27 -0.06 1.00 0.27 0.35 1.00 0.17 1.00 26.2 22.8 22.5 13.6 27.6 17.5 25.5 a. Calculate the portfolio variance for seven different portfolios. Note: Use decimals, not percents, in your calculations. Do not round intermediate calculations. Enter your answers as a decimal rounded to 5 places. b. What is the safest attainable portfolio under these restrictions? Complete this question by entering your answers in the tabs below. Required A Required B Calculate the portfolio variance for seven different portfolios.…
Assume you have just been hired as a business manager of PizzaPalace, a regional pizza restaurant chain. The company’s EBIT was $120 million last year and is not expected to grow. PizzaPalace is in the 25% state-plus-federal tax bracket, the risk-free rate is 6 percent, and the market risk premium is 6 percent. The firm is currently financed with all equity, and it has 10 million shares outstanding. When you took your corporate finance course, your instructor stated that most firms’ owners would be financially better off if the firms used some debt. When you suggested this to your new boss, he encouraged you to pursue the idea. If the company were to recapitalize, then debt would be issued, and the funds received would be used to repurchase stock. As a first step, assume that you obtained from the firm’s investment banker the following estimated costs of debt for the firm at different capital structures: Percent Financed with Debt, Wd Rd 0% 20% 8.0% 30% 8.5% 40% 10.0%…
Your eccentric Aunt Claudia has left you $50,000 in BP shares plus $50,000 cash. Unfortunately, her will requires that the BP stock not be sold for one year and the $50,000 cash must be entirely invested in one of the stocks shown below. Toronto Dominion Bank BHP Billiton Siemens Nestlé LVMH Toronto Dominion Bank Samsung BP Standard deviation (%) BHP Billiton 1.00 BHP Siemens Nestlé LVMH Toronto Dominion Bank Samsung BP 28.60 Portfolio Variance Siemens 0.39 1.00 25.40 Nestlé -0.05 0.29 1.00 9.24 LVMH 0.42 0.14 0.04 1.00 20.20 0.60 0.16 0.05 0.38 1.00 11.70 Samsung 0.52 0.36 -0.03 0.56 0.20 1.00 30.50 BP 0.49 -0.07 0.05 0.06 a. Calculate the portfolio variance for seven different portfolios. (Use decimals, not percents, in your calculations. Do not round intermediate calculations. Enter your answers as a decimal rounded to 5 places.) 0.35 0.36 1.00 19.80
Give typing answer with explanation and conclusion 1. To incentivize our employees, we are considering issuing them employee equity. The average employee would be issued stock options to purchase 800 shares at our current stock price of $210 per share. We are hopeful that the Smoothie business will catapult us to $230 per share in the future but recognize the risks. If an employee exercises the options at $210 per share, how much would the employee make before taxes?

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