Questions from General Finance

Q: The General Distribution Company (GDC) is a privately-held

The General Distribution Company (GDC) is a privately-held company in the whole- sale food distribution sector. You collected data on a sample of five listed companies in the same sector which are sim...

Q: The International Supplies Company (ISC) has convertible preferred stocks trading

The International Supplies Company (ISC) has convertible preferred stocks trading at $80 and serving an annual dividend of $2.40. The preferred is convertible into two shares of ISC common stocks. Sha...

Q: A company borrowed $10 million for five years from Atlantic Bank

A company borrowed $10 million for five years from Atlantic Bank. The company pays Atlantic Bank a fixed annual rate of 8 percent and must pay back the $10 million loan at the end of the borrowing per...

Q: Refer to the data on AWC in Exhibit 11.16.

Refer to the data on AWC in Exhibit 11.16. Suppose the board of AWC decides to invest the $250 million of cash in 1-year government bills yielding 4 percent and use the proceeds from the sale of the b...

Q: Refer to the data on AWC in Exhibit 11.16.

Refer to the data on AWC in Exhibit 11.16. Suppose the board of AWC decides to retain $250 million of cash permanently and invest it in a perpetual government bond. a. What would be AWC’s share price...

Q: Refer to the data on AWC in Exhibit 11.17 to

Refer to the data on AWC in Exhibit 11.17 to answer the following questions: a. What is the net present value of the 8 percent project? Explain its sign. b. What is the net present value of the 10 per...

Q: We wish to estimate the value of Portal Inc. under alternative

We wish to estimate the value of Portal Inc. under alternative assumptions about the firm’s performance. a. Using the discounted cash flow (DCF) approach to valuation and the following assumptions, pr...

Q: Stock A has an expected return of 8 percent and an 18

Stock A has an expected return of 8 percent and an 18 percent volatility. Stock B has an expected return of 16 percent and a 30 percent volatility. The correlation coefficient between the returns of s...

Q: Osiris Inc. is considering the acquisition of a competitor, Polos

Osiris Inc. is considering the acquisition of a competitor, Polos Corp. Osiris expects that the purchase would add $800,000 to its annual cash flow from assets indefinitely. Both firms are fully equit...

Q: Explain the difference between the risks that make up the following pairs

Explain the difference between the risks that make up the following pairs: a. Business risk versus financial risk b. Diversifiable risk versus undiversifiable risk c. Systematic risk versus unsystemat...