Questions from Financial Management

Q: Breuer Investment’s convertible bonds have a $1,000 par value

Breuer Investment’s convertible bonds have a $1,000 par value and a conversion price of $50 a share. What is the convertible issue’s conversion ratio?

Q: A computer costs $500 in the United States. The same

A computer costs $500 in the United States. The same model costs 550 euros in France. If purchasing power parity holds, what is the spot exchange rate between the euro and the dollar?

Q: On March 1, Minnerly Motors obtains a business loan from a

On March 1, Minnerly Motors obtains a business loan from a local bank. The loan is a $25,000 interest-only loan with a nominal rate of 11%. Interest is calculated on a simple interest basis with a 365...

Q: The Beranek Company, whose stock price is now $25,

The Beranek Company, whose stock price is now $25, needs to raise $20 million in common stock. Underwriters have informed the firm’s management that they must price the new issue to the public at $22...

Q: Zang Industries has hired the investment banking firm of Eric, Schwartz

Zang Industries has hired the investment banking firm of Eric, Schwartz, & Mann (ESM) to help it go public. Zang and ESM agree that Zang’s current value of equity is $60 million. Zang currently has 4...

Q: Porporate bonds issued by Johnson Corporation currently yield 8%. Municipal bonds

Porporate bonds issued by Johnson Corporation currently yield 8%. Municipal bonds of equal risk currently yield 6%. At what tax rate would an investor be indifferent between these two bonds?

Q: Molteni Motors Inc. recently reported $6 million of net income

Molteni Motors Inc. recently reported $6 million of net income. Its EBIT was $13 million, and its tax rate was 40%. What was its interest expense? (Hint: Write out the headings for an income statement...

Q: Talbot Enterprises recently reported an EBITDA of $8 million and

Talbot Enterprises recently reported an EBITDA of $8 million and net income of $2.4 million. It had $2.0 million of interest expense, and its corporate tax rate was 40%. What was its charge for deprec...

Q: Kendall Corners Inc. recently reported net income of $3.

Kendall Corners Inc. recently reported net income of $3.1 million and depreciation of $500,000. What was its net cash flow? Assume it had no amortization expense.

Q: In its most recent financial statements, Del-Castillo Inc.

In its most recent financial statements, Del-Castillo Inc. reported $70 million of net income and $900 million of retained earnings. The previous retained earnings were $855 million. How much in divid...