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Nitella [24]
2 years ago
11

Problem 14-04 Stock Repurchase A firm has 5 million shares outstanding with a market price of $15 per share. The firm has $15 mi

llion in extra cash (short-term investments) that it plans to use in a stock repurchase; the firm has no other financial investments or any debt. What is the firm's value of operations after the repurchase
Business
1 answer:
Charra [1.4K]2 years ago
5 0

Answer:

$60 million

Explanation:

The computation of the value of operations after the repurchase is shown below:-

Total corporate value = Value of operation + marketable securities

(5 × $15 million) = Value of operation + $15  million

$75 million = Value of operation + $15  million

Value of operation = $75 million - $15  million

= $60 million

We simply applied the above formula so that the firm's value of operations after the repurchase could come

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An investor purchases a 12-year, $1,000 par value bond that pays semiannual interest of $40. If the semiannual market rate of in
marysya [2.9K]

Answer:

Value of the bond = $862.013

Explanation:

The value of the bond is the present value of the future cash receipts expected from the bond. The value is equal to present values of interest payment and the redemption value (RV).

Value of Bond = PV of interest + PV of RV

The value of the bond can be worked out as follows:

Step 1

<em>Calculate the PV of Interest payment </em>

Present value of the interest payment

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Step 2

<em>PV of redemption Value </em>

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