Questions from Financial Management

Q: Consider the data in Problem 19-1. Assume that Reynolds’

Consider the data in Problem 19-1. Assume that Reynolds’ tax rate is 40% and that the equipment’s depreciation would be $100 per year. If the company leased the asset on a 2-year lease, the payment wo...

Q: Two companies, Energen and Hastings Corporation, began operations with identical

Two companies, Energen and Hastings Corporation, began operations with identical balance sheets. A year later, both required additional fixed assets at a cost of $50,000. Energen obtained a 5-year, $5...

Q: Big Sky Mining Company must install $1.5 million of

Big Sky Mining Company must install $1.5 million of new machinery in its Nevada mine. It can obtain a bank loan for 100% of the purchase price, or it can lease the machinery. Assume that the following...

Q: Stohs Semiconductor Corporation plans to issue $50 million of 20-

Stohs Semiconductor Corporation plans to issue $50 million of 20-year bonds in 6 months. The interest rate would be 9% if the bonds were issued today. How can Stohs set up a hedge against an increase...

Q: Niendorf Incorporated needs to raise $25 million to construct production facilities

Niendorf Incorporated needs to raise $25 million to construct production facilities for a new type of USB memory device. The firm’s straight nonconvertible debentures currently yield 9%. Its stock sel...

Q: Neubert Enterprises recently issued $1,000 par value 15-

Neubert Enterprises recently issued $1,000 par value 15-year bonds with a 5% coupon paid annually and warrants attached. These bonds are currently trading for $1,000. Neubert also has outstanding $1,0...

Q: Maese Industries Inc. has warrants outstanding that permit the holders to

Maese Industries Inc. has warrants outstanding that permit the holders to purchase 1 share of stock per warrant at a price of $25. a. Calculate the exercise value of the firm’s warrants if the common...

Q: The Tsetsekos Company was planning to finance an expansion. The principal

The Tsetsekos Company was planning to finance an expansion. The principal executives of the company all agreed that an industrial company such as theirs should finance growth by means of common stock...

Q: Fifteen years ago, Roop Industries sold $400 million of convertible

Fifteen years ago, Roop Industries sold $400 million of convertible bonds. The bonds had a 40-year maturity, a 5.75% coupon rate, and paid interest annually. They were sold at their $1,000 par value....

Q: The Howland Carpet Company has grown rapidly during the past 5 years

The Howland Carpet Company has grown rapidly during the past 5 years. Recently, its commercial bank urged the company to consider increasing its permanent financing. Its bank loan under a line of cred...