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Doss [256]
3 years ago
13

(Expected return calculation) "DEF" is a firm that is traded on NASDAQ. On 1/1/2014, the company issued 10,000 zero coupon bonds

. Each bond has a face value of $100 and matures on 1/1/2019. The bonds are the only debt of the company. A bond rating company estimated the total value of the DEF's assets on 1/1/2019 as follows:
Probability Value of DEF assets on 1/1/2019
0.2 2,000,000
0.3 1,750,000
0.4 1,200,000
0.1 1,000,000

Two years after the bond issue, on 1/1/2016, the bond rating agency reexamined the DEF Company and estimated the total value of the firm's assets as follows:

Probability Value of DEF assets on 1/1/2019
0.05 2,000,000
0.25 1,750,000
0.65 1,200,000
0.05 1.000.000
a. What will be the influence of the new probability distribution on the expected return on DEF bonds?
b. What will be the influence of the new estimation on the DEF stock price, assuming the cost of capital for the stock holders is 15%?
Business
1 answer:
ohaa [14]3 years ago
6 0

Answer: I not the best with math so I want to say 1,000,000

Explanation:

10,000 zero bonds at 100 face value would be about 1 million plus 15 percent is would be 150,000

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It is True that if a beneficiary is enrolled in a Medicare Advantage plan and they also sign up for a pdp plan, they will be automatically dropped from their Medicare Advantage (ma) plan.

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6 0
1 year ago
Advise florence and her team on how they can convince the staff using john kotters theory to lead change
mestny [16]
John kotters theory consist of 8 steps processes for leading change.

Change is hard.

Especially if we wanted to change something that deeply immersed in our habit. Florence and her team cannot just tell and force the staff to change. They have to be patient and implement the correct ways to the changes in order for it to be happen.
8 0
3 years ago
Martinez Corporation commenced operations in early 2020. The corporation incurred $48,500 of costs such as fees to underwriters,
igomit [66]

Answer:

See below.

Explanation:

Since the expenses are related to the formation of the business, we first capitalize these expenses and record them in our balance sheet as,

Debit Intangible Assets (Formation) by $48,500

Credit Cash/Bank by $48,500

This records an asset for the year of operation.

We amortize or depreciate these type of capitalized costs over a defined period of time. Assuming that we write off the entire cost by the end of first year we will record amortization as,

Debit Amortization expense/Income statement by $48,500

Credit Intangible Assets (Formation) by $48,500

Hope that helps.

7 0
3 years ago
Reedy Company reports the following information for 2012:
asambeis [7]

Answer:

Ending WIP= $13,500

Explanation:

<u>First, we need to calculate the factory overhead:</u>

Factory overhead= 25,000*0.75= $18,750

<u>Now, the ending WIP inventory:</u>

cost of goods manufactured= beginning WIP + direct materials + direct labor + allocated manufacturing overhead - Ending WIP

68,250 = 11,000 + 27,000 + 25,000 + 18,750 - Ending WIP

Ending WIP= $13,500

4 0
3 years ago
A landowner in Texas is offered $200,000 for the exploration rights to oil on her land, along with a 25% royalty on the future p
Shtirlitz [24]

Answer:

b. She should develop herself as the EMV of developing is $1.125 million, which is higher than the EMV of selling.

Explanation:

The probability of discovered oil = 0.25 (25%)

Selling the exploration right= Selling Price + Probability of discovered oil × Royalty% × Future Profit

= $200,000 + 0.25 × 0.25 × $7,500,000 = $668,750

Developing = Probability of finding the oil × Future Profits - Cost of Well

= 0.25 × $7,500,000 - $750,000 = $1,125,000

= $1.125 million

Therefore the EMV for selling the exploration rights is less than the developing, the landowner will develop the site by his own.

4 0
3 years ago
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