To what extent are employees of a bankrupt firm paid their wages and benefits due?
> What process do banks use to evaluate bank loans to small versus midmarket business firms?
> What do global organizations like the World Trade Organization and the International Monetary Fund do?
> Nuran Security Systems, Inc. needs to raise $150 million for asset expansion. As it raises the capital funding, Nuran wants to maintain its current debt ratio of 60 percent. Nuran has been approved for a loan commitment from its local bank. The bank has
> Howett Pockett, Inc. needs to raise $12 million in new capital funding from a seasoned equity offering. In discussions with its investment bank, Howett Pocket learns that the bankers recommend a gross price of $13.50 per share and they will charge an und
> Hughes Technology Corp. recently went public with an initial public offering in which they received a total of $60 million in new capital funding. The underwriter used a firm commitment offering in which the offer price was $10 and the underwriter’s spre
> Renee’s Boutique, Inc. needs to raise $58 million to finance firm expansion. In discussions with its investment bank, Renee’s learns that the bankers recommend an offer price of $33.75 per share and that 1.8 million shares of stock be sold. If the net pr
> DiPitro’s Paint and Wallpaper, Inc. needs to raise $1 million to finance plant expansion. In discussions with its investment bank, DiPitro’s learns that the bankers recommend a gross price of $25 per share and that 45,000 shares of stock be sold. If the
> During the last year, you have had a loan commitment from your bank to fund working capital for your business. The total line available was $17 million, of which you took down $13 million. It is now the end of the loan commitment period and your bank had
> Use the following financial statements for Lake of Egypt Marina to calculate and interpret the Altman’s Z-score for this firm as of 2018. / /
> During the last year, you have had a loan commitment from your bank to fund inventory purchases for your small business. The total line available was $500,000, of which you took down $400,000. It is now the end of the loan commitment period and your bank
> Howett Pockett, Inc. plans to issue 10 million new shares of its stock. In discussions with its investment bank, Howett Pocket learns that the bankers recommend a net proceed of $33.80 per share and they will charge an underwriter’s spread of 5.5 percent
> Zimba Technology Corp. recently went public with an initial public offering of 2.5 million shares of stock. The underwriter used a firm commitment offering in which the net proceeds was $8.05 per share and the underwriter’s spread was 8 percent of the gr
> Harper’s Dog Pens, Inc., with the help of its investment bank, recently issued 8.5 million shares of new stock. The offer price on the stock was $12.00 per share and Harper’s received a total of $97.75 million from the stock offering. Calculate the net p
> A linear probability model you have developed finds that a firm has a PD of .16. What does this mean?
> The Fitness Studio, Inc., with the help of its investment bank, recently issued 2.5 million shares of new stock. The offer price on the stock was $20.50 per share and The Fitness Studio received a total of $48,687,500 through this stock offering. Calcula
> Renee’s Boutique, Inc. needs to raise $58 million to finance firm expansion. In discussions with its investment bank, Renee’s learns that the bankers recommend a debt issue with an offer price of $1,000 per bond and they will charge an underwriter’s spre
> DiPitro’s Paint and Wallpaper, Inc. needs to raise $1 million to finance plant expansion. In discussions with its investment bank, DiPitro’s learns that the bankers recommend a debt issue with gross proceeds of $1,000 per bond and they will charge an und
> Casey’s One Stop has been approved for a $127,500 loan commitment from its local bank. The bank has offered the following terms: term = one year, up-front fee = 85 basis points, back-end fee = 35 basis points, and rate on the loan = 7.75 percent. Casey’s
> You have approached your local bank for a start-up loan commitment for $250,000 needed to open a computer repair store. You have requested that the term of the loan be one year. Your bank has offered you the following terms: size of loan commitment = $25
> Describe the difference between a horizontal merger and a vertical merger.
> Harper’s Dog Pens, Inc., with the help of its investment bank recently issued $191.5 million of new debt. The offer price on the debt was $1,000 per bond and the underwriter’s spread was 5 percent of the gross proceeds. Calculate the amount of capital fu
> The Fitness Studio, Inc., with the help of its investment bank, recently issued $43.125 million of new debt. The offer price (and face value) on the debt was $1,000 per bond and the underwriter’s spread was 7 percent of the gross proceeds. Calculate the
> Don’s Captain Morgan, Inc. needs to raise $12.5 million to finance plant expansion. In discussions with its investment bank, Don’s learns that the bankers recommend an offer price (or gross proceeds) of $25.50 per share and Don’s will receive $23.75 per
> Husker’s Tuxedo’s, Inc. needs to raise $250 million to finance its plan for nationwide expansion. In discussions with its investment bank, Husker’s learns that the bankers recommend an offer price (or gross price) of $35 per share and they will charge an
> Calculate the total fees a firm would have to pay when its bank offers the firm the following loan commitment: A loan commitment of $4.25 million with an up-front fee of 75 basis points and a back-end fee of 25 basis points. The take down on the loan is
> A firm has an Altman’s Z-score of 1.76. What does this mean?
> You have approached your local bank for a start-up loan commitment for $250,000 needed to open a computer repair store. You have requested that the term of the loan be one year. Your bank has offered you the following terms: size of loan commitment = $25
> A U.S. firm is expecting cash flows of 25 million Mexican pesos and 35 million Indian rupees. The current spot exchange rates are: $1 = 12.268 pesos and $1 = 45.204 rupees. If these cash flows are not received for one year and the expected spot rates at
> The U.S. dollar spot exchange rate with the Australian dollar is $1 = AU$1.2697. The U.S. dollar and euro exchange rate is $1 = €0.7559. If the cross rate between the euro and Australian dollar is €1 = AU$1.598 then show that an arbitrage is possible. W
> The U.S. dollar spot exchange rate with the Canadian dollar is $1 = CA$1.18. The U.S. dollar and Swiss franc exchange rate is $1 = 1.219 francs. If the cross rate between the franc and Canadian dollar is 1 franc = CA$0.9750 then show that an arbitrage is
> WorldGone, Inc. declared bankruptcy on September 25, 2018 through a Chapter 7 filing. WorldGone’s balance sheet at the time of the bankruptcy filing is listed below. The accrued wages were earned within the last 90 days prior to filing
> A U.S. firm is expecting to pay cash flows of 15 million Egyptian pounds and 25 million Qatar rials. The current spot exchange rates are: $1 = 5.725 pounds and $1 = 3.639 rials. If these cash flows are delayed one year and the expected spot rates a
> A financial manager has determined that the appropriate discount rate for a foreign project is 16 percent. However, that discount rate applies in the United States using dollars. What discount rate should the manager use in the foreign country using the
> A financial manager has determined that the appropriate discount rate for a foreign project is 12 percent. However, that discount rate applies in the United States using dollars. What discount rate should be used in the foreign country using the foreign
> If the price of copper in Europe is €2.12 per ounce, what is the expected price of copper in the United States if the spot exchange rate is $1 = €0.7623?
> If the price of silver in England is £15.23 per ounce, what is the expected price of silver in the United States if the spot exchange rate is $1 = £0.6535?
> Compute the number of dollars that can be bought with one million of each foreign currency units: a. $1 = 3.7497 Saudi Arabian riyal b. $1 = 44.150 Philippine peso c. $1 = 0.5409 Latvian lat
> What is the difference between a linear discriminant and a linear probability credit-scoring model?
> Compute the number of dollars that can be bought with two million of each foreign currency units: a. $1 = 20,864 Vietnam dong b. $1 = 6.300 Venezuelan bolivar fuerte c. $1 = 9.175 South African rand
> Compute the amount of each foreign currency that can be purchased for one million dollars: a. 1 Korean won = $0.0009 b. 1 Malaysian ringgit = $0.3238 c. 1 Thai baht = $0.0331
> Compute the amount of each foreign currency that can be purchased for $500,000: a. 1 Danish krone = $0.170 b. 1 Indian rupee = $0.0184 c. 1 Israeli shekel = $0.2751
> What is the order of payment to a firm’s creditors in a Chapter 7 bankruptcy?
> Convert each of the following indirect quotes to dollar direct quotes: a. $1 = 3.7497 Saudi Arabian riyal b. $1 = 44.15 Philippine peso c. $1 = 0.5409 Latvian lat
> Convert each of the following indirect quotes to dollar direct quotes: a. $1 = 20,864 Vietnam dong b. $1 = 6.300 Venezuelan bolivar fuerte c. $1 = 9.175 South African rand
> Convert each of the following direct quotes to dollar indirect quotes: a. 1 Korean won = $0.0009 b. 1 Malaysian ringgit = $0.3238 c. 1 Thai baht = $0.0331
> Convert each of the following direct quotes to dollar indirect quotes: a. 1 Danish krone = $0.170 b. 1 Indian rupee = $0.0184 c. 1 Israeli shekel = $0.2751
> Below are the Consumer Price Index inflation rates each year for the United States and Japan. Also shown is the spot exchange rate for the beginning of each year. A. Using PPP (equation 19.3), compute what the 1-year forward exchange rate should be each
> Give some examples of the financial complications that occur when evaluating a capital budgeting project in a foreign country.
> Can a U.S. firm experience political risk problems in its overseas projects because of the U.S. government? Give examples.
> Over the past decade, China has acquired hundreds of billions of U.S. dollars because of the trade imbalance between the two countries. They have used many of these dollars to purchase U.S. Treasury bonds. What would likely happen to the dollar’s value,
> If the spot exchange rate between the U.S. dollar and the Singapore dollar is $1 = SG$1.5266 and the 3-month expected exchange rate is $1 = SG$1.5305, then what is the expected inflation relationship between the two countries?
> You own $25,000 in subordinated debt of Local Crossings, Inc. which declared bankruptcy on May 15, 2018 through a Chapter 7 filing. Local Crossings’ balance sheet at the time of the bankruptcy filing is listed below. / / The accrued wages were earned wit
> What forces are at work that cause the price of wheat per bushel to be the same in most every country of the world?
> What happens to a country’s currency over time when it has a high inflation rate? What will that mean for the country’s exports and imports?
> If a Sony television costs $500 in the United States, what do you think it should cost in Japan? What are some reasons that your price might not be right?
> What are the advantages of borrowing money in the country you plan to invest it in?
> What is the difference between a Chapter 11 and a Chapter 7 bankruptcy?
> What is the job of the trustee in an informal liquidation of a firm’s assets?
> A linear probability model you have developed finds there are two factors influencing the past bankruptcy behavior of firms: the debt- to-equity ratio and the profit margin. Based on past bankruptcy experience, the linear probability model is estimated a
> A firm is experiencing a temporary period of financial distress as the result of a hurricane that has hit its local area. Because many of the firm’s customers have been severely hurt by the hurricane, they are unable to pay their debts to the firm. This
> What is meant by hedging exchange rate risk and what are some ways it is done?
> A linear probability model you have developed finds there are two factors influencing the past bankruptcy behavior of firms: the debt- to-equity ratio and the sales-to-total assets ratio. Based on past bankruptcy experience, the linear probability model
> Does a Chapter 7 bankruptcy increase the probability that creditors will be paid in full more so than a Chapter 11 bankruptcy?
> What is the difference between business failure, economic failure, and technical insolvency?
> The managers of State Bank have been approached by City Bank about a possible merger. State Bank is asking a price of $205 million to be purchased by City Bank. State Bank currently has total cash flows of $15 million that are expected to grow at 1 perce
> Why is NPV valuation an appropriate tool to use in the evaluation of a merger target?
> The managers of BSW, Inc. have approached KCMP Corp. about a possible merger. KCMP Corp. is asking a price of $72 million to be purchased by BSW, Inc. KCMP Corp. currently has total cash flows of $6 million that are expected to grow at two percent annual
> How can managers’ personal incentives result in value-destroying mergers and acquisitions?
> Tractor Supply, Corp. currently has a 50 percent market share in banking services, followed by Farm Equipment, Inc., with 30 percent and Plow Mart with 20 percent. a. What is the concentration ratio as measured by the Herfindahl-Hirschman Index (HHI)? b.
> What is the Herfindahl-Hirschman Index? How is it calculated and interpreted?
> Cakes, Corp. currently has a 60 percent market share in banking services, followed by Cookies, Inc., with 20 percent and Dippen Dough with 20 percent. a. What is the concentration ratio as measured by the Herfindahl-Hirschman Index (HHI)? b. If Cakes, Co
> What is the difference between economies of scope and economies of scale? Can two firms involved in a merger benefit from both economies of scale and economies of scope?
> Describe the difference between a forward rate selling at a discount and selling at a premium. If the spot rate between the U.S. dollar and the Brazilian real is $1 = 2.0875 real and the 3-month forward rate is $1 = 2.1025 real, is the forward real selli
> You own stock in Make-UP-Artists, Inc. which has just made a bid of $30 million to purchase MHM Corporation. MHM Corp. currently has total cash flows of $2.5 million that are expected to grow by 2 percent annually for the next 5 years. Managers estimate
> A survey of a national market has provided the following average cost data: Jackson County Construction (JCC) has assets of $2.55 million and an average cost of 30 percent. Arkansas Architects (AA) has assets of $1.7 million and an average cost of 25 per
> Describe the three dimensions of revenue synergies that may be achieved in a merger.
> A survey of a local market has provided the following average cost data: Johnson Construction Corp. (JCC) has assets of $3 million and an average cost of 20 percent. Anderson Architects (AA) has assets of $4 million and an average cost of 30 percent. Col
> The Altman’s Z-score model has several weaknesses. What are they?
> A linear probability model you have developed finds there are two factors influencing the past bankruptcy behavior of firms: the equity multiplier and the total asset turnover ratio. Based on past bankruptcy experience, the linear probability model is es
> What is synergy and how does it apply to mergers?
> Suppose a linear probability model you have developed finds there are two factors influencing the past bankruptcy behavior of firms: the debt ratio and the profit margin. Based on past bankruptcy experience, the linear probability model is estimated as:
> The Justice Department has been asked to review a merger request for a market with the following four firms. Firm Assets A……………..$12 million B……………..25 million
> Jenny’s Day Care is considering a merger with Lionel’s Diaper Manufacturers. Jenny’s total operating costs of producing services are $595,000 for sales volume (SJ) of $2.4 million. Lionel’s total operating costs of producing services are $340,000 for a s
> George’s Dry Cleaning is considering a merger with Weezzie’s Laundry Supply Stores. George’s total operating costs of producing services are $550,000 for sales volume (SG) of $4.5 million. Weezzie’s total operating costs of producing services are $185,00
> A linear probability model you have developed finds there are two factors influencing the past bankruptcy behavior of firms: the equity multiplier and the total asset turnover ratio. Based on past bankruptcy experience, the linear probability model is es
> Suppose a linear probability model you have developed finds there are two factors influencing the past bankruptcy behavior of firms: the debt ratio and the profit margin. Based on past bankruptcy experience, the linear probability model is estimated as:
> Suppose that the financial ratios of a potential borrowing firm took the following values: X1 = Net working capital/Total assets = 0.27, X2 = Retained earnings/Total assets = 0.37, X3 = Earnings before interest and taxes/Total assets = 0.44, X4 = Market
> Suppose that the financial ratios of a potential borrowing firm take the following values: X1 = Net working capital/Total assets = 0.10, X2 = Retained earnings/Total assets = 0.20, X3 = Earnings before interest and taxes/Total assets = 0.22, X4 = Market
> Consider a market that has three firms with the following market shares: Firm A = 35% Firm B = 41% Firm C = 24% Suppose firm A wants to acquire firm C so that the post-acquisition market would exhibit the following shares: A + C = 76% B = 24% Calculat
> Consider a market that has three firms with the following market shares: Firm A = 35% Firm B = 41% Firm C = 24% Suppose firm B wants to acquire firm C so that the post-acquisition market would exhibit the following shares: B + C = 65% A = 35% Calculate
> Cindy’s Computer Corp. is considering a merger with Bobby’s Hard Drive, Inc. Cindy’s total operating costs of producing services are $3.4 million for a sales volume (SC) of $16 million. Bobby’s total operating costs of producing services are $2.5 million
> Classify each of the following as a horizontal merger, a vertical merger, a market extension merger, a conglomerate merger, or a product extension merger.
> What are the risks of foreign direct investment into the United States? What does new FDI into the United States mean for firms already operating in that industry in the United States?
> Peter’s TV Supplies is considering a merger with Jan’s Radio Supply Stores. Peter’s total operating costs of producing services are $250,000 for a sales volume (SP) of $4.5 million. Jan’s total operating costs of producing services are $50,000 for a sale
> The current spot rate between the U.S. dollar and the Netherland Antilles guilder is $1 = 1.7915 guilder. If the inflation rate in the United States is three percent and in the Netherland Antilles is seven percent, then what is the expected spot rate in
> The current spot rate between the U.S. dollar and the Swedish krona is $1 = 6.5228 krona. If the inflation rate in the United States is four percent and in Sweden is 2 percent, then what is the expected spot rate in one year?
> The spot rate between the U.S. dollar and the Taiwan dollar is $1 = TWD29.905. If the interest rate in the United States is five percent and in Taiwan is three percent, then what should be the 1-month forward exchange rate?
> The spot rate between the U.S. dollar and the New Zealand dollar is $1 = NZD1.1867. If the interest rate in the United States is 5 percent and in New Zealand is four percent, then what should be the 3- month forward exchange rate?
> The Russian financial crisis of 1998 caused its currency to be dramatically devalued. What is the percentage change in value of a $100 million investment in Russia when the exchange rate changes from $1 = 6 rubles to $1 = 21 rubles?
> In 1997, many East Asian currencies suddenly and dramatically devalued. What is the percentage change in value of a $50 million investment in Indonesia when the exchange rate changes from $1 = 2,000 rupiah to $1 = 10,000 rupiah?
