Consider the table shown below to answer the question posed in part a. Parts b and c are independent of the given table. Callaway Golf (ELY) Alaska Air Group (ALK) Yum! Brands (YUM) Caterpillar Tractor (CAT) Microsoft (MSFT) Number of Market Capitalization ($ millions) $ 2,572 Share (millions) X Stock Price = 94.2 X 27.30 123.7 301.7 543.3 7,560 X 50.70 X 103.07 186.66 242.12 == $ 101,412 = $ 1,830,427 xx $ 6,272 $ 31,096 S a. The price of Yum! Brands stock has risen to $180. What is the market value of the firm's equity if the number of outstanding shares does not change? Note: Enter your answer in dollars not in billions of dollars. b. The rating agency has revised Catalytic Concepts' bond rating to A (use Table 2.2). What interest rate, approximately, would the company now need to pay on its bonds? Note: Enter your answer as a percent rounded to 1 decimal place. c. A farmer and a meatpacker use the commodity markets to reduce their risk. One agrees to buy live cattle in the future at a fixed price, and the other agrees to sell. Which one sells? a. Market value b. Interest rate 1.7% c. Which one sells? A farmer

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)
8th Edition
ISBN:9781285065137
Author:Eugene F. Brigham, Joel F. Houston
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Chapter14: Distributions To Shareholders: Dividend And Share Repurchases
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Consider the table shown below to answer the question posed in part a. Parts b and c are independent of the given table.
Callaway Golf (ELY)
Alaska Air Group (ALK)
Yum! Brands (YUM)
Caterpillar Tractor (CAT)
Microsoft (MSFT)
Number of
Market
Capitalization
($ millions)
$ 2,572
Share
(millions)
X Stock Price =
94.2
X
27.30
123.7
301.7
543.3
7,560
X
50.70
X
103.07
186.66
242.12
==
$ 101,412
=
$ 1,830,427
xx
$ 6,272
$ 31,096
S
a. The price of Yum! Brands stock has risen to $180. What is the market value of the firm's equity if the number of outstanding
shares does not change?
Note: Enter your answer in dollars not in billions of dollars.
b. The rating agency has revised Catalytic Concepts' bond rating to A (use Table 2.2). What interest rate, approximately, would the
company now need to pay on its bonds?
Note: Enter your answer as a percent rounded to 1 decimal place.
c. A farmer and a meatpacker use the commodity markets to reduce their risk. One agrees to buy live cattle in the future at a fixed
price, and the other agrees to sell. Which one sells?
a. Market value
b. Interest rate
1.7%
c. Which one sells?
A farmer
Transcribed Image Text:Consider the table shown below to answer the question posed in part a. Parts b and c are independent of the given table. Callaway Golf (ELY) Alaska Air Group (ALK) Yum! Brands (YUM) Caterpillar Tractor (CAT) Microsoft (MSFT) Number of Market Capitalization ($ millions) $ 2,572 Share (millions) X Stock Price = 94.2 X 27.30 123.7 301.7 543.3 7,560 X 50.70 X 103.07 186.66 242.12 == $ 101,412 = $ 1,830,427 xx $ 6,272 $ 31,096 S a. The price of Yum! Brands stock has risen to $180. What is the market value of the firm's equity if the number of outstanding shares does not change? Note: Enter your answer in dollars not in billions of dollars. b. The rating agency has revised Catalytic Concepts' bond rating to A (use Table 2.2). What interest rate, approximately, would the company now need to pay on its bonds? Note: Enter your answer as a percent rounded to 1 decimal place. c. A farmer and a meatpacker use the commodity markets to reduce their risk. One agrees to buy live cattle in the future at a fixed price, and the other agrees to sell. Which one sells? a. Market value b. Interest rate 1.7% c. Which one sells? A farmer
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