Principles of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
12th Edition
ISBN: 9781259144387
Author: Richard A Brealey, Stewart C Myers, Franklin Allen
Publisher: McGraw-Hill Education
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Chapter 31, Problem 9PS
a)
Summary Introduction
To discuss: The cost of debt of a company is darn high and the banks did not reduce the interstate as long as the company stuck in the kind of volatile widget trading business. The company needs to acquire other companies with the safer income streams.
b)
Summary Introduction
To discuss: The given comment
c)
Summary Introduction
To discuss: The given comment
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Students have asked these similar questions
You read a story in the newspaper announcing the proposed merger of Dell Computer and Gateway. The merger is expected to greatly increase Gateway’s profitability. If you decide to invest in Gateway stock, you can expect to earn
(a) above-average returns since you will share in the higher profits.
(b) above-average returns since your stock price will definitely appreciate as higher
profits are earned.
(c) below average returns since computer makers have low-profit rates.
(d) a normal return since stock prices adjusts to reflect expected changes in profitability almost immediately.
General Meters is considering two mergers. The first is with Firm A in its own volatile
industry, the auto speedometer industry, while the second is a merger with Firm B in an
industry that moves in the opposite direction (and will tend to level out performance due to
negative correlation).
\table [[General Meters Merger with Firm A, General Meters Merger with Firm B,], [Possible
Earnings ($ in, Possible Earnings ($ in,,,], [millions), Probability,0.20, $20, Probability], [$
20, 0.40, 35, 0.15,], [35, 0.40, 50, 0.50,], [50,, 0.35,,]]
a. Compute the mean, standard deviation, and coefficient of variation for both investments
Note: Do not round intermediate calculations. Enter your answers in millions. Round
"Coefficient of variation" to 3 decimal places and "Standard deviation" to 2 decimal places.
\table[[, Merger A, Merger B], [Mean,,], [Standard deviation,,], [Coefficient of variation,,]]
b. Assuming investors are risk-averse, which alternative can be expected to bring the
higher…
In recent years Constable Inc. has suffered losses, and its stock currently sells for only $0.50 per share. Management wants to use a reverse split to get the price up to a more "reasonable" level, which it thinks is $21 per share. How many of the old shares must be given up for one new share to achieve the $21 price, assuming this transaction has no effect on total market value?
Chapter 31 Solutions
Principles of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
Ch. 31 - Prob. 1PSCh. 31 - Prob. 2PSCh. 31 - Prob. 3PSCh. 31 - Taxation Which of the following transactions are...Ch. 31 - Prob. 5PSCh. 31 - Prob. 6PSCh. 31 - Prob. 9PSCh. 31 - Merger gains and costs Sometimes the stock price...Ch. 31 - Merger motives Suppose you obtain special...Ch. 31 - Prob. 12PS
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