8- The Burma Hat Company’s warrant is trading for
. The warrant carries the option to purchase two shares of common stock for $48. What is the speculative premium if the stock price is $51.30?
$10.20
9- How much must you invest today at 10% interest in order to see your investment grow to $12,000 in 3 years?
10- Firm X has a tax rate of 29%. The price of its new preferred stock is $65 and its flotation cost is $2.00. The cost of new preferred stock is 12%. What is the firm’s dividend? (Round your answer to 2 decimal places.)
11- Ambrin Corp. expects to receive $5,000 per year for 13 years and $6,500 per year for the next 13 years. What is the present value of this 26 year cash flow? Use an 9% discount rate. Use
Appendix D
and Appendix B to calculate the answer. (Round your intermediate calculations to the nearest dollar value.)
12- The “floor” or pure bond value of a convertible bond is found by
13- Which of the following characteristics are drawbacks of convertible bonds?
Conversion may be forced on the bondholder by call provisions on the convertible bond.
14- Which of the following is true?
15- A firm’s preferred stock pays an annual dividend of $2, and the stock sells for $71. Flotation costs for new issuances of preferred stock are 7% of the stock value. What is the after-tax cost of preferred stock if the firm’s tax rate is 35%? (Round your answer to 2 decimal places.)
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