(18-1) Security Brokers Inc. specializes in underwriting new issues by small firms. On a recent offering of Beedles Inc., the terms were as follows:

Price to public $5 per share

Number of shares 3 million

Proceeds to Beedles $14,000,000

The out-of-pocket expenses incurred by Security Brokers in the design and distribution of the issue were $300,000. What profit or loss would Security Brokers incur if the issue were sold to the public at the following average price?

a. $5 per share

b. $6 per share

c. $4 per share

(18-2) 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 per share because of signaling effects. The underwriters’compensation will be 5% of the issue price, so Beranek will net $20.90 per share. The firm will also incur expenses in the amount of $150,000. How many shares must the firm sell to net $20 million after underwriting and flotation expenses?

Hastings Corporation is interested in acquiring Vandell Corporation. Vandell has 1 million shares outstanding and a target capital structure consisting of 30% debt. Vandell’s debt interest rate is 8%. Assume that the risk-free rate of interest is 5% and the market risk premium is 6%. Both Vandell and Hastings face a 40% tax rate.

(22-1) Vandell’s free cash flow (FCF0) is $2 million per year and is expected to grow at a constant rate of 5% a year; its beta is 1.4. What is the value of Vandell’s operations? If Vandell has $10.82 million in debt, what is the current value of Vandell’s stock?Hint:Use the corporate valuation model.

(22-2) Hastings estimates that if it acquires Vandell, interest payments will be $1.5 million per year for 3 years, after which the current target capital structure of 30% debt will be maintained. Interest in the fourth year will be $1.472 million, after which interest and the tax shield will grow at 5%. Synergies will cause the free cash flows to be $2.5 million, $2.9 million, $3.4 million, and $3.57 million in Years 1 through 4, respectively, after which the free cash flows will grow at a 5% rate. What is the unlevered value of Vandell, and what is the value of its tax shields? What is the per share value of Vandell to Hastings Corporation? Assume that Vandell now has $10.82 million in debt.

(24-1) The trustee’s costs total $281,250, and the firm has no accrued taxes or wages. The debentures are subordinated only to the notes payable. If the firm goes bankrupt and liquidates, how much will each class of investors receive if a total of $2.5 million is received from sale of the assets?

Southwestern Wear Inc. has the following balance sheet:

Current assets $1,875,000 Accounts payable $ 375,000

Fixed assets 1,875,000 Notes payable 750,000

Subordinated debentures 750,000

Total debt $1,875,000

Common equity 1,875,000

Total assets $3,750,000 Total liabilities and equity $3,750,000

 

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16. What is meant by a dedicated computer? a. Which is used by one person only b. Which is assigned one and only one task c. Which uses one kind of software d. Which is meant for application software 17. The system unit of a personal computer typically contains all of the following except: a. Microprocessor b. Disk controller c. Serial interface d. Modem 18. A computer program that converts an entire program into machine language is called a/an a. Interpreter b. Simulator c. Compiler d. Commander 19. A computer program that translates one program instructions at a time into machine language is called a/an a. Interpreter b. CPU c. Compiler d. Simulator 20. A small or intelligent device is so called because it contains within it a a. Computer b. Microcomputer c. Programmable d. Sensor

 

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15. The Wall Street Journal reported that Juniper Networks, Inc.—a maker ofcompany network equipment—plans to offer its more than 1,000 employeesthe opportunity to reprice their stock options. Juniper’s announcement comesat a time when its stock price is down 90 percent, leaving many employees’stock options worthless. How do you think Juniper’s CEO justified repricingthe employees’ stock options to the shareholders?

 

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(15 points; 3 points each part) Choose the signature for methods that solve the following problems, or state that it is impossible to do so. You do not need to write the body of these methods (method writing is covered in Turinascraft.Zyante, and Javabat. 3.

Attachments:

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