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Option to suspend natural resource extraction facilities (such as oil wells or gold mines) provides a good example of the value of the option to suspend operations. Why?
Bonjur, Inc. imports French cheeses for distribution in the US. On April 1, the company purchased cheese costing 400,000 euros. Payment is due in euros on July 1. The spot rate on April 1 was $1.20
Market Efficiency Implications Explain why a characteristic of an efficient market is that investments in that market have zero NPVs.
On June 1, Johnson, Inc. received an order from a Japanese customer for 2,500,000 yen to be paid upon receipt of the goods, scheduled for August 1. The rates for $1 US are as follows:
The present capital structure of Jones Corporation is shown below. The business is worth $4.7 million as a going concern. The trustee has formulated a less leveraged capital structure having a total
Usry Company holds stock in company A and company B and possesses voting control over both. Balance sheet data follow:
In general terms, what is the Capital Asset Pricing Model (CAPM)? What assumptions were made when it was derived?
Burger Queen, a national hamburger chain, is considering a smaller chain, Johns Burger. Burger Queen's analysts project that the merger will result in the following incremental net cash flows (in mi
If one stock in a value-weighted portfolio goes up in price and all other stock prices remain the same, what trades are necessary to keep the portfolio value weighted?
Shim Company wishes to acquire Siegel Company by exchanging 0.8 share of its stock for each share of Siegel. Financial data follow:
Paula Company wants to acquire David Company. Relevant data follow: Paula issues its shares to make the acquisition. The ratio of exchange is 2.5. (a) What is the earnings per share of the merged com
The following information is provided: For each case, determine (a) the exchange ratio in shares, and (b) the exchange ratio in market price.
Given that Dov Pharmaceuticals was down by 98 percent for 2006, why did some investors hold the stock? Why didn't they sell out before the price declined so sharply?
The following data concerning companies A and B are presented: Company B is the acquiring company, exchanging its shares on a one-for-one basis for company A's shares. The exchange ratio is based on
Given that advanced Magnetics was up by 439 percent for 2006, why didn't all investors hold advanced magnetics?
Company R wishes to acquire company S. Company R's stock sells for $100 per share. Company S's stock sells for $40 a share. Due to merger negotiations, company R offers $50 a share. The acquisition
Explain the theory behind the dividends valuation approach. Why are dividends value-relevant to common equity shareholders?
Master Corporation wants to buy certain fixed assets of Smith Corporation. However, Smith Corporation wants to dispose of its entire business. The balance sheet of Smith follows:
Efficient Markets Hypothesis what are the implications of the efficient markets hypothesis for investors who buy and sell stocks in an attempt to beat the market?
Yohai Corporation is thinking of purchasing Klein Corporation for $70,000 in cash. Yohai's current cost of capital is 16 percent. Klein's estimated overall cost of capital is anticipated to be 14 pe
If the YZ Company stock goes to $16, what is the option worth. If the stock goes to $43, would there be a gain or loss?
EJH has a beta of 1.2, CSH has a beta of 0.6, and KMS has a beta of 1.0. If you put 25% of your money in EJH, 25% in CSH, and 50% in KMS, what is the beta of your portfolio?
Great Northern Oil Shale Company is a company actively engaged in the oil services industry. The company provides replacement parts for drilling rigs and has just begun to test a device that measure
Drake Corporation's convertible bond has a conversion price of $90. The conversion ratio is 15. The market price of the stock is $130. The call price is $1,800. Would the bondholder rather convert
Diversification has enormous value to investors, yet opportunities for diversification should not sway capital investment decisions by corporations.