Question: Assume the following financial data for Rembrandt

> How does the SML react to changes in the rate of interest, changes in the rate of inflation, and changing investor expectations?

> The following information is from Harrelson Inc.’s, financial statements. Sales (all credit) were $28.50 million for last year. Fill in the balance sheet:

> We are given the following information for the Pettit Corporation. Current assets are composed of cash, marketable securities, accounts receivable, and inventory. Calculate the following balance sheet items. a. Accounts receivable. b. Marketable securi

> The Griggs Corporation has credit sales of $1,200,000. Given these ratios, fill in the following balance sheet.

> Construct the current assets section of the balance sheet from the following data. (Use cash as a plug figure after computing the other values.)

> The Canton Corporation shows the following income statement. The firm uses FIFO inventory accounting. a. Assume in 20X2 that the same 17,600-unit volume is maintained, but that the sales price increases by 10 percent. Because of FIFO inventory policy,

> Omni Technology Holding Company has the following three affiliates: a. Which affiliate has the highest return on sales? b. Which affiliate has the lowest return on assets? c. Which affiliate has the highest total asset turnover? d. Which affiliate has

> The Global Products Corporation has three subsidiaries. a. Which division has the lowest return on sales? b. Which division has the highest return on assets? c. Compute the return on assets for the entire corporation. d. If the $8,760,000 investment in

> Refer to the following financial statements for Crosby Corporation: a) Prepare a statement of cash flows for the Crosby Corporation using the general procedures indicated in Table 2–10. b) Describe the general relationship between net i

> For December 31, 20X1, the balance sheet of Baxter Corporation was as follows: Sales for 20X2 were $245,000, and the cost of goods sold was 60 percent of sales. Selling and administrative expense was $24,500. Depreciation expense was 8 percent of plant

> Vriend Software Inc.’s book value per share is $15.20. Earnings per share is $1.88, and the firm’s stock trades in the stock market at 3.5 times book value per share, what will the P/E ratio be? (Round to the nearest whole number.)

> Bonds of different risk classes will have a spread between their interest rates. Is this spread always the same? Why?

> Amigo Software Inc. has total assets of $889,000, current liabilities of $192,000, and long-term liabilities of $154,000. There is $87,000 in preferred stock outstanding. Thirty thousand shares of common stock have been issued. a. Compute book value (ne

> The Holtzman Corporation has assets of $400,000, current liabilities of $50,000, and long-term liabilities of $100,000. There is $40,000 in preferred stock outstanding; 20,000 shares of common stock have been issued. a. Compute book value (net worth) per

> Landers Nursery and Garden Stores has current assets of $220,000 and fixed assets of $170,000. Current liabilities are $80,000 and long-term liabilities are $140,000. There is $40,000 in preferred stock outstanding and the firm has issued 25,000 shares o

> Nova Electrics anticipates cash flow from operating activities of $6 million in 20X1. It will need to spend $1.2 million on capital investments to remain competitive within the industry. Common stock dividends are projected at $.4 million and preferred s

> The Rogers Corporation has a gross profit of $880,000 and $360,000 in depreciation expense. The Evans Corporation also has $880,000 in gross profit, with $60,000 in depreciation expense. Selling and administrative expense is $120,000 for each company. Gi

> Identify whether each of the following items increases or decreases cash flow: Increase in accounts receivable…………….Decrease in prepaid expenses Increase in notes payable…………………………….……Increase in inventory Depreciation expense……………………………………….….Dividend

> Stilley Corporation had earnings after taxes of $436,000 in 20X2 with 200,000 shares outstanding. The stock price was $42.00. In 20X3, earnings after taxes declined to $206,000 with the same 200,000 shares outstanding. The stock price declined to $27.80.

> Botox Facial Care had earnings after taxes of $370,000 in 20X1 with 200,000 shares of stock outstanding. The stock price was $31.50. In 20X2, earnings after taxes increased to $436,000 with the same 200,000 shares outstanding. The stock price was $42.00.

> Quantum Technology had $669,000 of retained earnings on December 31, 20X2. The company paid common dividends of $35,500 in 20X2 and had retained earnings of $576,000 on December 31, 20X1. How much did Quantum Technology earn during 20X2, and what would e

> Elite Trailer Parks has an operating profit or $200,000. Interest expense for the year was $10,000; preferred dividends paid were $18,750; and common dividends paid were $30,000. The tax was $61,250. The firm has 20,000 shares of common stock outstanding

> What is the difference between the following yields: coupon rate, current yield, and yield to maturity?

> Arrange the following items in proper balance sheet presentation:

> Fill in the blank spaces with categories 1 through 7: 1. Balance sheet (BS) 2. Income statement (IS) 3. Current assets (CA) 4. Fixed assets (FA) 5. Current liabilities (CL) 6. Long-term liabilities (LL) 7. Stockholders’ equity (SE)

> Low Carb Diet Supplement Inc. has two divisions. Division A has a profit of $156,000 on sales of $2,010,000. Division B is able to make only $28,800 on sales of $329,000. Based on the profit margins (returns on sales), which division is superior?

> Lemon Auto Wholesalers had sales of $1,000,000 last year and cost of goods sold represented 78 percent of sales. Selling and administrative expenses were 12 percent of sales. Depreciation expense was $11,000 and interest expense for the year was $8,000.

> Stein Books Inc. sold 1,900 finance textbooks for $250 each to High Tuition University in 20X1. These books cost $210 to produce. Stein Books spent $12,200 (selling expense) to convince the university to buy its books. Depreciation expense for the year w

> Precision Systems had sales of $820,000, cost of goods of $510,000, selling and administrative expense of $60,000, and operating profit of $103,000. What was the value of depreciation expense? Set this problem up as a partial income statement, and determ

> Prepare an income statement for Virginia Slim Wear. Take your calculations all the way to computing earnings per share.

> Prepare in good form an income statement for Franklin Kite Co. Inc. Take your calculations all the way to computing earnings per share.

> Given the following information, prepare in good form an income statement for Jonas Brothers Cough Drops.

> Given the following information, prepare an income statement for the Dental Drilling Company.

> How does a leveraged buyout work? What does the debt structure of the firm normally look like after a leveraged buyout? What might be done to reduce the debt?

> Elizabeth Tailors Inc. has assets of $8,940,000 and turns over its assets 1.9 times per year. Return on assets is 13.5 percent. What is the firm’s profit margin (returns on sales)?

> Rod Fishing Supplies had sales of $2,500,000 and cost of goods sold of $1,710,000. Selling and administrative expenses represented 10 percent of sales. Depreciation was 6 percent of the total assets of $4,680,000. What was the firm’s operating profit?

> a. Swank Clothiers had sales of $383,000 and cost of goods sold of $260,000. What is the gross profit margin (ratio of gross profit to sales)? b. If the average firm in the clothing industry had a gross profit of 25 percent, how is the firm doing?

> Sosa Diet Supplements had earnings after taxes of $800,000 in the year 20X1 with 200,000 shares of stock outstanding. On January 1, 20X2, the firm issued 50,000 new shares. Because of the proceeds from these new shares and other operating improvements, e

> You are the vice president of finance for Exploratory Resources, headquartered in Houston, Texas. In January 20X1, your firm’s Canadian subsidiary obtained a six-month loan of 150,000 Canadian dollars from a bank in Houston to finance the acquisition of

> A Peruvian investor buys 150 shares of a U.S. stock for $7,500 ($50 per share). Over the course of a year, the stock goes up by $4 per share. a. If there is a 10 percent gain in the value of the dollar versus the nuevo sol, what will be the total percent

> An investor in the United States bought a one-year Brazilian security valued at 195,000 Brazilian reals. The U.S. dollar equivalent was 100,000. The Brazilian security earned 16 percent during the year, but the Brazilian real depreciated 5 cents against

> From the base price level of 100 in 1981, Saudi Arabian and U.S. price levels in 2010 stood at 250 and 100, respectively. Assume the 1981 $/riyal exchange rate was $.46/riyal. Suggestion: Using the purchasing power parity, adjust the exchange rate to com

> From the base price level of 100 in 1979, Saudi Arabian and U.S. price levels in 2008 stood at 200 and 410, respectively. If the 1979 $/riyal exchange rate was $0.26/riyal, what should the exchange rate be in 2008? Suggestion: Using purchasing power pari

> The Wall Street Journal reported the following spot and forward rates for the Swiss franc ($/SF): a. Was the Swiss franc selling at a discount or premium in the forward market? b. What was the 30-day forward premium (or discount)? c. What was the 90-da

> What are the disadvantages to being public?

> Al Simpson helped start Excel Systems several years ago. At the time, he purchased 116,000 shares of stock at $1 per share. Now he has the opportunity to sell his interest in the company to Folsom Corp. for $50 a share in cash. His capital gains tax rate

> The Hollings Corporation is considering a two-step buyout of the Norton Corporation. The latter firm has 2.5 million shares outstanding and its stock price is currently $40 per share. In the two-step buyout, Hollings will offer to buy 51 percent of Norto

> The Jeter Corporation is considering acquiring the A-Rod Corporation. The data for the two companies are as follows: a. The Jeter Corp. is going to give A-Rod Corp. a 60 percent premium over A-Rod’s current market value. What price wi

> Assume the following financial data for the Noble Corporation and Barnes Enterprises: a. If all the shares of the Noble Corporation are exchanged for those of Barnes Enterprises on a share-for-share basis, what will post merger earnings per share be fo

> Worldwide Scientific Equipment is considering a cash acquisition of Medical Labs for $1.6 million. Medical Labs will provide the following pattern of cash inflows and synergistic benefits for the next 25 years. There is no tax loss carryforward. The co

> J & J Enterprises is considering a cash acquisition of Patterson Steel Company for $4,500,000. Patterson will provide the following pattern of cash inflows and synergistic benefits for the next 20 years. There is no tax loss carryforward. The cost

> Assume that Western Exploration Corp. is considering the acquisition of Ogden Drilling Company. The latter has a $470,000 tax loss carryforward. Projected earnings for the Western Exploration Corp. are as follows: a. How much will the total taxes of We

> General Meters is considering two mergers. The first is with Firm A in its own volatile industry, the auto speedometer industry, while the second is a merger with Firm B in an industry that moves in the opposite direction (and will tend to level out perf

> Assume the Knight Corporation is considering the acquisition of Day Inc. The expected earnings per share for the Knight Corporation will be $4.00 with or without the merger. However, the standard deviation of the earnings will go from $2.40 to $1.60 with

> Discuss the benefits accruing to a company that is traded in the public securities markets.

> Chicago Savings Corp. is planning to make an offer for Ernie’s Bank & Trust. The stock of Ernie’s Bank & Trust is currently selling for $44 a share. a. If the tender offer is planned at a premium of 50 percent over market price, what will be the value of

> The Clark Corporation desires to expand. It is considering a cash purchase of Kent Enterprises for $3 million. Kent has a $700,000 tax loss carryforward that could be used immediately by the Clark Corporation, which is paying taxes at the rate of 30 perc

> Sherwood Forest Products has a convertible bond quoted on the NYSE bond market at 90. (Bond quotes represent the percentage of par value. Thus 70 represents $700, 80 represents $800, and so on.) It matures in 10 years and carries a coupon rate of 5½ perc

> The bonds of Generic Labs Inc. have a conversion premium of $70. Their conversion price is $25. The common stock price is $22.50. What is the price of the convertible bond?

> The bonds of Goniff Bank & Trust have a conversion premium of $90. Their conversion price is $20. The common stock price is $16.50. What is the price of the convertible bonds?

> O’Reilly Moving Company has a $1,000 par value convertible bond outstanding that can be converted into 20 shares of common stock. The common stock is currently selling for $43.10 a share, and the convertible bond is selling for $900.00. a. What is the co

> The warrants of Dragon Pet Co. allow the holder to buy a share of stock at $26.20 and are selling for $14.10. The stock price is currently $23.50. To what price must the stock go for the warrant purchaser to at least be assured of breaking even?

> The warrants of Integra Life Sciences allow the holder to buy a share of stock at $11.75 and are selling for $2.85. The stock price is currently $8.50. To what price must the stock go for the warrant purchaser to at least be assured of breaking even?

> Manpower Electric Company has 6 percent convertible bonds outstanding. Each bond has a $1,000 par value. The conversion ratio is 20, the stock price $36, and the bonds mature in 16 years. a. What is the conversion value of the bond? b. Assume after one y

> Tulsa Drilling Company has $1.3 million in 12 percent convertible bonds outstanding. Each bond has a $1,000 par value. The conversion ratio is 40, the stock price is $36, and the bonds mature in 10 years. The bonds are currently selling at a conversion p

> What is shelf registration? How does it differ from the traditional requirements for security offerings?

> Myers Drugs Inc. has 1.20 million shares of stock outstanding. Earnings after taxes are $9 million. Myers also has warrants outstanding that allow the holder to buy 100,000 shares of stock at $15 per share. The stock is currently selling for $50 per shar

> Online Network Inc. has a net income of $650,000 in the current fiscal year. There are 100,000 shares of common stock outstanding, along with convertible bonds, which have a total face value of $1.6 million. The $1.6 million is represented by 1,600 diffe

> Quantum Inc. has warrants outstanding that allow the holder to purchase 1.5 shares of stock per warrant at $30 per share (exercise price). Thus, each individual share can be purchased at $30 with the warrant. The common stock is currently selling for $36

> Mr. John Hailey has $1,000 to invest in the market. He is considering the purchase of 50 shares of Comet Airlines at $20 per share. His broker suggests that he may wish to consider purchasing warrants instead. The warrants are selling for $10, and each w

> The Gifford Investment Company bought 90 Cable Corporation warrants one year ago and would like to exercise them today. The warrants were purchased at $25 each, and they expire when trading ends today. (Assume there is no speculative premium left.) Cable

> The Redford Investment Company bought 100 Cinema Corp. warrants one year ago and would like to exercise them today. The warrants were purchased at $24 each, and they expire when trading ends today (assume there is no speculative premium left). Cinema Cor

> Assume you can buy a warrant for $6 that gives you the option to buy one share of common stock at $14 per share. The stock is currently selling at $18 per share. a. What is the intrinsic value of the warrant? b. What is the speculative premium on the war

> Vernon Glass Company has $15 million in 10 percent convertible bonds outstanding. The conversion ratio is 40, the stock price is $17, and the bond matures in 10 years. The bonds are currently selling at a conversion premium of $45 over their conversion v

> Defense Systems Inc. has convertible bonds outstanding that are callable at $1,070. The bonds are convertible into 33 shares of common stock. The stock is currently selling for $39.25 per share. a. If the firm announces it is going to call the bonds at

> Standard Olive Company of California has a convertible bond outstanding with a coupon rate of 5 percent and a maturity date of 20 years. It is rated Aa, and competitive, nonconvertible bonds of the same risk class carry a 10 percent return. The conversio

> What is the purpose of market stabilization activities during the distribution process?

> The Olsen Mining Company has been very successful in the last five years. Its $1,000 par value convertible bonds have a conversion ratio of 32. The bonds have a quoted interest rate of 7 percent a year. The firm’s common stock is currently selling for $4

> Pittsburgh Steel Company has a convertible bond outstanding, trading in the marketplace at $960. The par value is $1,000, the coupon rate is 10 percent, and the bond matures in 20 years. The conversion price is $55 and the company’s common stock is selli

> Reynolds Technology has a convertible bond outstanding, trading in the marketplace at $835. The par value is $1,000, the coupon rate is 9 percent, and the bond matures in 25 years. The conversion ratio is 20, and the company’s common stock is selling for

> Preston Toy Co. has warrants outstanding that allow the holder to purchase a share of stock for $22 (exercise price). The common stock is currently selling for $28, while the warrant is selling for $9.25 per share. a. What is the intrinsic (minimum) valu

> In doing a five-year analysis of future dividends, the Dawson Corporation is considering the following two plans. The values represent dividends per share. a. How much in total dividends per share will be paid under each plan over five years? b. Mr. Br

> Squash Delight Inc. has the following balance sheet: The firm’s stock sells for $10 a share. a. Show the effect on the capital account(s) of a two-for-one stock split. b. Show the effect on the capital accounts of a 10 percent stock d

> A financial analyst is attempting to assess the future dividend policy of Environmental Systems by examining its life cycle. She anticipates no payout of earnings in the form of cash dividends during the development stage (I). During the growth stage (II

> Planetary Travel Co. has $240,000,000 in stockholders’ equity. Eighty million dollars is listed as common stock and the balance is in retained earnings. The firm has $500,000,000 in total assets and 2 percent of this value is in cash. Earnings for the ye

> The following companies have different financial statistics. What dividend policies would you recommend for them? Explain your reasons.

> Polycom Systems earned $553 million last year and paid out 25 percent of earnings in dividends. a. By how much did the company’s retained earnings increase? b. With 100 million shares outstanding and a stock price of $101, what was the dividend yield?

> In what way is an investment banker a risk taker?

> The Hastings Sugar Corporation has the following pattern of net income each year, and associated capital expenditure projects. The firm can earn a higher return on the projects than the stockholders could earn if the funds were paid out in the form of di

> The Carlton Corporation has $5 million in earnings after taxes and 2 million shares outstanding. The stock trades at a P/E of 20. The firm has $4 million in excess cash. a. Compute the current price of the stock. b. If the $4 million is used to pay divid

> Worst Buy Company has had a lot of complaints from customers of late and its stock price is now only $2 per share. It is going to employ a one-for-five reverse stock split to increase the stock value. Assume Dean Smith owns 140 shares. a. How many shares

> Health Systems Inc. is considering a 15 percent stock dividend. The capital accounts are as follows: The company’s stock is selling for $32 per share. The company had total earnings of $19,200,000 with 6,000,000 shares outstanding and

> Ace Products sells marked playing cards to blackjack dealers. It has not paid a dividend in many years, but is currently contemplating some kind of dividend. The capital accounts for the firm are as follows: The company’s stock is sel

> Wilson Pharmaceuticals’ stock has done very well in the market during the last three years. It has risen from $55 to $80 per share. The firm’s current statement of stockholders’ equity is as follows:

> Omni Telecom is trying to decide whether to increase its cash dividend immediately or use the funds to increase its future growth rate. It will use the dividend valuation model originally presented in Chapter 10 for purposes of analysis. The model was sh

> The Vinson Corporation has earnings of $500,000 with 250,000 shares outstanding. Its P/E ratio is 20. The firm is holding $300,000 of funds to invest or pay out in dividends. If the funds are retained, the aftertax return on investment will be 15 percen

> Phillips Rock and Mud is trying to determine the maximum amount of cash dividends it can pay this year. Assume its balance sheet is as follows: a. From a legal perspective, what is the maximum amount of dividends per share the firm could pay? b. In te

> The Western Pipe Company has the following capital section in its balance sheet. Its stock is currently selling for $6 per share. The firm intends to first declare a 15 percent stock dividend and then pay a 25-cent cash dividend (which also causes a re

> Explain the role of financial intermediaries in the flow of funds through the three-sector economy.

> Midland Petroleum is holding a stockholders’ meeting next month. Ms. Ramsey is the president of the company and has the support of the existing board of directors. All 12 members of the board are up for reelection. Mr. Clark is a dissident stockholder. H