Foundations of Financial Management
16th Edition
ISBN: 9781259277160
Author: Stanley B. Block, Geoffrey A. Hirt, Bartley Danielsen
Publisher: McGraw-Hill Education
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Chapter 15, Problem 12P
Summary Introduction
To calculate: Becker Brothers’ overall gain or loss from managing the issue.
Introduction:
Underwriting Spread:
It is the difference between the price at which underwriters buy the new securities of a venture and that at which those securities are sold to the public.
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If CARDO Co purchases the net assets of SYANO Co by issuing 4,000 shares of their P10 par value shares with a fair value of P35 per share, a P40,000 direct cost and a P50,000 stock issue cost however remain unpaid. The companies also agreed on the following:
CARDO guarantees the prices of there stocks and promises to pay the peso decline in theirshares within one year.
CARDO Co promises to pay the stockholders of SYANO Co an additional P100,00 if the net income of the company in the next year will be more than P500,000.
CARDO estimates that there is an 80% probability of achieving the target income.
REQUIREMENTS:A. Consolidated Total Assets at the date of acquisitionB. Consolidated Equity at the date of acquisition
If CARDO Co purchases the net assets of SYANO Co by issuing 4,000 shares of their P10 par valueshares with a fair value of P35 per share, a P40,000 direct cost and a P50,000 stock issue cost howeverremain unpaid. The companies also agreed on the following: CARDO guarantees the prices of there stocks and promises to pay the peso decline in theirshares within one year. CARDO Co promises to pay the stockholders of SYANO Co an additional P100,00 if the netincome of the company in the next year will be more than P500,000. CARDO estimates thatthere is an 80% probability of achieving the target income.
REQUIREMENTS:A. Consolidated Total Assets at the date of acquisitionB. Consolidated Equity at the date of acquisition
Amherst Corporation, an investment banking company, often has extra cash to invest. Suppose Amherst buys900 shares of Hurricane Corporation stock at $57 per share, representing less than 5% ofHurricane’s outstanding stock. Amherst expects to hold the Hurricane stock for one month andthen sell it. The purchase occurs on December 15, 2018. On December 31, the market price of ashare of Hurricane stock is $58 per share.Requirements1. What type of investment is this for Amherst? Give the reason for your answer.2. Record Amherst’s purchase of the Hurricane stock on December 15 and the adjustment tomarket value on December 31.3. Show how Amherst would report this investment on its balance sheet at December 31 andany gain or loss on its income statement for the year ended December 31, 2018.
Chapter 15 Solutions
Foundations of Financial Management
Ch. 15 - Prob. 1DQCh. 15 - Prob. 2DQCh. 15 - Prob. 3DQCh. 15 - Prob. 4DQCh. 15 - Prob. 5DQCh. 15 - Prob. 6DQCh. 15 - Prob. 7DQCh. 15 - Prob. 8DQCh. 15 - Prob. 9DQCh. 15 - Prob. 10DQ
Ch. 15 - What is privatization? (LO15-5)Ch. 15 - Louisiana Timber Company currently has 5 million...Ch. 15 - The Hamilton Corporation Company has 4 million...Ch. 15 - American Health Systems currently has 6,400,000...Ch. 15 - Using the information in Problem 3, assume that...Ch. 15 - Jordan Broadcasting Company is going public at 50...Ch. 15 - Prob. 6PCh. 15 - Tiger Golf Supplies has 25 million in earnings...Ch. 15 - Prob. 8PCh. 15 - Walton and Company is the managing investment...Ch. 15 - Prob. 10PCh. 15 - Prob. 11PCh. 15 - Prob. 12PCh. 15 - Prob. 13PCh. 15 - Prob. 14PCh. 15 - Prob. 15PCh. 15 - Prob. 16PCh. 15 - Prob. 17PCh. 15 - Midland Corporation has a net income of 19...Ch. 15 - Prob. 19PCh. 15 - Prob. 20PCh. 15 - Prob. 21PCh. 15 - Prob. 22P
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