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hoa [83]
3 years ago
6

Knight Inventory Systems, Inc., has announced a rights offer. The company has announced that it will take five rights to buy a n

ew share in the offering at a subscription price of $33. At the close of business the day before the ex-rights day, the company’s stock sells for $54 per share. The next morning, you notice that the stock sells for $44 per share and the rights sell for $2 each. What is the value of the stock ex-rights? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)What is the value of a right?
Are the rights underpriced or overpriced?
What is the amount of immediate profit you can make on ex-rights day per share?
Immediate profit $
Business
1 answer:
s344n2d4d5 [400]3 years ago
5 0

Answer:

1) What is the value of a right?

value of a right = (stock price - right subscription price) / number of rights needed to buy a share

value of a right = ($54 - $33) / 5 = $21 / 5 = $4.20

2) Are the rights underpriced or overpriced?

the rights are underpriced because they are sold at $2 each, and their fair price is $4.20

3) What is the amount of immediate profit you can make on ex-rights day per share?

you buy 5 rights and use them to buy one stock at $33, total cost = (5 x $2) + $33 = $43. Immediately sell the stock at $44, and you can earn $1 per stock.

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It is July 16. A company has a portfolio of stocks worth $100 million. The beta of the portfolio is 1.2. The company would like
Anuta_ua [19.1K]

Answer:

A. The company should take Short position and

140 contract

B. The company should take Long position and 60 contract

B.

Explanation:

Calculation for what position that the company should take

Using this formula

Company position=(Beta of the portfolio*Change in beta of the portfolio) *Portfolio of stocks /Index futures price* Each Contract index times

Let plug in the formula

Company position =(1.2-0.5)*$100 million/2,000*250

Company position=0.7*$100 million/500,000

Company position=$70,000,000/500,000

Company position=140 contract

Therefore the position that the company should take will be SHORT position with 140 contract

B. Calculation for the increase in beta of the portfolio from 1.2 to 1.5 and what position tthr company should take in the futures contract and how many contracts

Using this formula

Company position=Increase in beta of the portfolio *Portfolio of stocks /Index futures price* Each Contract index times

Let plug in the formula

Company position =(1.5-1.2)*$100 million/2,000*250

Company position=0.3*$100 million/500,000

Company position=$30,000,000/500,000

Company position=60 contract

Therefore the company should take Long position and 60 contract

4 0
3 years ago
Why do invoices generally include an invoice number?
IRINA_888 [86]
Your answer is D :)
Hope this Helps!

5 0
3 years ago
Read 2 more answers
Assume that you are on the financial staff of Vanderheiden Inc., and you have collected the following data: The yield on the com
Katyanochek1 [597]

Answer:

WACC = 7.48%

Explanation:

We can calculate the Firm's WACC by using Excel.

Let's assume this is our Excel Blank Sheet.

          A                    B                                  C                    D

1   Particulars        Rate                             Weight          Weighted rate

2   Debt           = 7.75%(1 - 40%)                 0.45               =B2×C2

                        = 4.65%

3   Equity         = (0.65/(19 × (1 - 10%)))+6%

                        = 9.80%                               0.55             = B3×C3

4                     WACC                                   =SUM(D2:D3)

<h3>Output:</h3>

          A                    B                  C                    D

1   Particulars        Rate              Weight          Weighted rate

2   Debt            = 4.65%             45%               2.09%

3   Equity          = 9.80%             55%               5.39%

4                     WACC                                        7.48%

4 0
3 years ago
Dennisport Corporation has an acid-test ratio of 1.7. It has current liabilities of $56,000 and noncurrent assets of $87,000. Th
ra1l [238]

Answer: $33600

Explanation:

Current liabilities = $56,000

Noncurrent assets = $87,000

First and foremost, we should note that:

Acid-test ratio = Current Assets / Current liabilities

Therefore,

1.7 = Current Assets / $56,000

Current assets = $56000 × 1.7

= $95,200

Also,

Current ratio = Current Assets / Current liabilities

Therefore,

2.3 = Current Assets / $56,000

Current assets = $56,000 × 2.3

= $128,800

Then, the inventory and prepaid expenses will be:

= $128,800 - $95,200

= $33,600

3 0
2 years ago
At the end of 2017, Grouper Company has accounts receivable of $916,100 and an allowance for doubtful accounts of $42,400. On Ja
Gennadij [26K]

Answer:

Since the debt has already been provided for by Debiting bad debt expense $42,400 and Crediting Allowance for doubtful debt $42,400, the entries required to write off the debt from Ramirez Company of $6,330 will be

Debit Allowance for doubtful debt $6,330

Credit Accounts receivable $6,330

Being entries to writeoff debt due Ramirez Company of $6,330

Explanation:

When a company makes sales on account, debit accounts receivable and credit sales. Based on assessment, some or all of the receivables may be uncollectible.  

To account for this, debit bad debit expense and credit allowance for doubtful debt. Should the debt become uncollectible (i.e go bad), debit allowance for doubtful debt and credit accounts receivable.

Where a debit that had previously been determined to have gone bad gets settled, debit cash and credit bad debt expense.

8 0
3 years ago
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