Questions from Corporate Finance

Q: The price of Tara, Inc., stock will be either $

The price of Tara, Inc., stock will be either $50 or $70 at the end of the year. Call options are available with one year to expiration. T-bills currently yield 5 percent. a. Suppose the current price...

Q: Utility companies often face a decision to build new plants that burn

Utility companies often face a decision to build new plants that burn coal, oil, or both. If the prices of both coal and gas are highly volatile, how valuable is the decision to build a plant that can...

Q: The Webber Company is an international conglomerate with a real estate division

The Webber Company is an international conglomerate with a real estate division that owns the right to erect an office building on a parcel of land in downtown Sacramento over the next year. This buil...

Q: General Modems has five-year warrants that currently trade in the

General Modems has five-year warrants that currently trade in the open market. Each warrant gives its owner the right to purchase one share of common stock for an exercise price of $55. a. Suppose the...

Q: What happens to the price of a convertible bond if interest rates

What happens to the price of a convertible bond if interest rates increase?

Q: Hannon Home Products, Inc., recently issued $2 million worth

Hannon Home Products, Inc., recently issued $2 million worth of 8 percent convertible debentures. Each convertible bond has a face value of $1,000. Each convertible bond can be converted into 21.50 sh...

Q: Bubbling Crude Corporation, a large Texas oil producer, would like

Bubbling Crude Corporation, a large Texas oil producer, would like to hedge against adverse movements in the price of oil because this is the firm’s primary source of revenue. What should the firm do?...

Q: You are long 10 gold futures contracts, established at an initial

You are long 10 gold futures contracts, established at an initial settle price of $1,580 per ounce, where each contract represents 100 ounces. Over the subsequent four trading days, gold settles at $1...

Q: Indicate the impact of the following on the cash and operating cycles

Indicate the impact of the following on the cash and operating cycles, respectively. Use the letter I to indicate an increase, the letter D for a decrease, and the letter N for no change. a. The terms...

Q: If Wild Widgets, Inc., were an all-equity company

If Wild Widgets, Inc., were an all-equity company, it would have a beta of .85. The company has a target debt–equity ratio of .40. The expected return on the market portfolio is 11 percent, and Treasu...