Cost of Capital

Cash Flows and Working Capital. A firm's balance sheets for year-end 2000 and 2001 contain the following data. What happened to investment in net working capital during 2001? All items are in millions of dollars. Dec. 31, 2000 Dec. 31, 2001 Accounts receivable 32 35 Inventories 25 30 Accounts payable 12 25 I don't understand, can you help?

How corporations issue Securities

Having heard about IPO underpricing, I put in an order to my broker for 1,000 shares of every IPO he can get for me. After 3 months, my investment record is as follows: IPO Shares allocated to me Price per share Initial Return A 500 $10 7% B 200 $20 12% C 1000 $8 -2% D 0 $12 23% a. What is the average underpricing of this sample of IPOs? b. What is the average initial return on my "... click for more

You enter into a forward contract to buy a 10-year, zero coupon bond that will be iussued in one year

You enter into a forward contract to buy a 10-year, zero coupon bond that will be iussued in one year. The face value of the bond is $1000, and the 1-year and 11-year spot interest rates are 3 percent per annum and 8 percent per annum, respectively. Both of these interest rates are expressed as effective annual yiels (EAY's). a) What is the forward price of your contract? b) suppose botht the 1-year and 11-year spot rates unexpectedly shift downward by 2 percent. What is the price of a forward contract otherwise identical to yours? Please show the mathematical calculations

Current Ratio

How would the following actions affect a firm's current ratio? (a) Inventory is purchased and paid for with cash, it is not purchased on account. (b) The firm takes out a short-term bank loan to pay its overdue accounts payable. (c) A customer prepays in full for specially ordered merchandise that will take 60 days to manufacture. (d) Inventory is sold at the firm's normal 35% markup over cost.

Problem Set

Chapter 6: Practice Problems 10, 19 10. Stock Values. Integrated Potato Chips paid a $1 per share dividend yesterday. You expect the dividend to grow steadily at a rate of 4 percent per year. a. What is the expected dividend in each of the next 3 years? b. If the discount rate for the stock is 12 percent, at what price will the stock sell? c. What is the expected stock price 3 years from now? d. If you buy the stock and plan to hold it for 3 years, what payments will you receive? What is the present value of those payments? Compare your answer to (b). 19. Constant-Growth Model. Here are data on two stocks, both of which have discount rates of 15 percent: a. What are... click for more