CHAPTER 14esm是什么
An Overview of Corporate Financing
Answers to Problem Sets
1. a. Fal
b. True
c. True
2. a. 40,000/.50 = 80,000 shares
b. 78,000 shares
c. 2,000 shares are held as Treasury stock
d. 20,000 shares
e. See table below
f. See table below
3. a. 80 votes
b. 10 X 80 = 800 votes.
4. a. subordinated
b. floating rate
c. convertible
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d. warrant
e. common stock; preferred stock.
5. a. Fal
b. True
c. Fal
6. a. Par value is $0.05 per share, which is computed as follows:
$443 million/8,863 million shares
b. The shares were sold at an average price of:
cross stitch
[$443 million + $70,283 million]/8,863 million shares = $7.98
c. The company has repurchad:
8,863 million – 6,746 million = 2,117 million shares
d. Average repurcha price:
$57,391 million/2,117 million shares = $27.11 per share.
e. The value of the net common equity is:
$443 million + $70,283 million + $44,148 million – $57,391 million
= $57,483 million
7. a. The day after the founding of Inbox:
Common shares ($0.10 par value) | $ | 50,000 |
Additional paid-in capital | | 1,950,000 |
Retained earnings | | 0 |
Treasury shares | | 0 |
Net common equity | $ | 2,000,000 |
| | |
b. After 2 years of operation:
Common shares ($0.10 par value) | $ | 50,000 |
Additional paid-in capital | | 1,950,000 |
Retained earnings | | 120,000 |
Treasury shares | | 0 |
Net common equity | $ | 2,120,000 |
| | |
c. After 3 years of operation:
Common shares ($0.10 par value) | $ | 150,000 |
Additional paid-in capital | | 6,850,000 |
Retained earnings | | 370,000 |
Treasury shares | | 0 |
Net common equity | $ | 7,370,000 |
| | |
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8. a.
Common shares ($1.00 par value) | $1,008 |
Additional paid-in capital | 5,444 |
Retained earnings | 16,250 |
Treasury shares | (14,015) |
Net common equity | $8,687 |
| |
b.
Common shares ($1.00 par value) | $1,008 |
Additional paid-in capital | 5,444 |
Retained earnings | 16,250 |
Treasury shares | (14,715) |
Net common equity | $7,987 |
| |
9. One would expect that the voting shares have a higher price becau they have an a
dded benefit/responsibility that has value.
10. a.
Gross profits | $ | 760,000 |
| aoi sora Interest | | 100,000 |
EBT | $ | 660,000 |
Tax (at 35%) | | 231,000 |
Funds available to common shareholders | $ | 429,000 |
| | |
b.
Gross profits (EBT) 日语能力 | $ | 760,000 |
Tax (at 35%) | | 266,000 |
Net income | $ | 494,000 |
Preferred dividend | | 80,000 |
Funds available to common shareholders | $ | 414,000 |
| | |
11. Internet exerci; answers will vary.
12. a. Less valuable
b.More valuable
c.More valuable
d.Less valuableingress
13. Answers may differ. Some key events of the financial crisis through the end of 2008 include:
auntyJune 2007: Bear Stearns pledges $3.2 billion to aid one of its ailing hedge funds
Sept. 2007: Northern Rock receives emergency funding from the Bank of England
Oct. 2007: Citigroup begins a string of writedowns bad on mortgage loss
firebatDec. 2007: Fed establishes Term Auction Facility lines
Jan. 2008: Ratings agencies threaten to downgrade Ambac and MBIA (major bond issuers)
Feb. 2008: Economic stimulus package signed into law
Mar. 2008: JPMorgan purchas Bear Stearns with support from the Fed
Mar. 2008: SEC propos ban on naked short lling
July 2008: FDIC takes over IndyMac Bank
Sept. 2008: Lehman forced into bankruptcy
B of A purchas Merrill Lynch
10 banks create $70 billion liquidity fund
AIG debt downgraded
RMC money market fund “breaks the buck”
Treasury bailout plan voted down in the Hou
Oct. 2008: 9 large banks agree to capital injection from Treasury
Revid bailout plan pass in Hou
Consumer confidence hits lowest point on record
The NY Fed has an excellent timeline of events at:
frb/rearch/global_economy/Crisis_Timeline.pdf
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14. Answers will differ. Some purported caus of the financial crisis include:
∙Long periods of very low interest rates leading to easy credit conditions
∙High leverage ratios
∙The bursting of the US housing market bubble
∙High rates of default on subprime mortgages
∙Massive loss on investments in mortgage backed curities
∙
Opaque derivative markets and amplified loss through credit default swaps
∙High rates of unemployment and job loss
15. a. For majority voting, you must own or otherwi control the votes of a simple majority of the shares outstanding, i.e., one-half of the shares outstanding plus one. Here, with 200,000 shares outstanding, you must control the votes of 100,001 shares.
b.With cumulative voting, the directors are elected in order of the total number of votes each receives. With 200,000 shares outstanding and five directors to be elected, there will be a total of 1,000,000 votes cast. To ensure you can elect at least one director, you must ensure that someone el can elect at most four directors. That is, you must have enough votes so that, even if the others split their votes evenly among five other candidat
es, the number of votes your candidate gets would be higher by one.
