Explore BrainMass

Explore BrainMass

    Dividends, Stock Repurchase and Policy

    BrainMass Solutions Available for Instant Download

    For each of the following situations, determine (1) whether the bonds sold at face value, a premium, or at a discount, and (2) whether interest expense recognized each year for the bonds was less than, equal to, or greater than the amount of interest paid on the bonds. a. Bonds with a stated rate of 10 percent were sold to yield an effective rate of 8 percent. b. Bonds with a stated rate of 7 percent were sold to yield an effective rate of 7 percent. c. Bonds with a stated rate of 6 percent were sold to yield an effective rate of 11 percent. 2. Rocky Road Company sold $5 million of six-year six percent debentures (bonds) on January 1, 2009. The bonds sold to yield an effective rate of seven percent. Interest is paid annually on December 31st. a. What is the price of the bonds? (Please show calculations clearly) b. What would be the price of the bonds if they were sold to yield a real rate of five percent?( Please show calculations clearly) 3. Lindon Processing Company has been taking bids for four new processors. Martin Steel Goldbaum Equipment has offered to sell them a processor for $29,000 each. In addition Martin would finance the transaction through a capital lease over the expected ten-year life of the processor with no money down. No mention of the size of the required year-end lease payments has been made yet, but Lindon knows that Martin will expect an eight percent return on the lease arrangement. Assume that Lindon excepts this option when answering the following questions. ( Please Include detailed calculations) a. What will be the amount of each annual year-end lease payment? Round to a whole number. b. What amount will Lindon capitalize as an asset on its balance sheet for the processors and for the lease obligation? c. What total interest amount will Lindon pay over the life of the lease for financing? d. What portion of the first payment will be attributable to interest? 4. Speedway Corporation manufactures automobile steering wheels. Selected portions of the company's recent financial statement are given below: Speedway Corporation Balance Sheet (Excerpt) December 31, 2009 Stockholder' Equity - Common stock, $1 par value, 1,000,000 shares authorized, 840,00 shares issued - $840,000 Paid-in capital in excess of par value - 3,250,000 Retained earnings - 2,125,000 Treasury stock (50,000 shares at cost) - (380,000) Total stockholders' equity - $5,835,000 Speedway Corporation Statement of Stockholders' Equity December 31, 2009 (in thousands) Com. Stock Paid-In Capital Retained Earn Treasury St Total Dec. 31,2008 $710 $2,300 $1,525 $(150) $4,385 Net income 700 700 Dividends (100) (100) Stock purchased (230) (230) Stock issued $130 $950 1,080 Dec. 31, 2009 $840 $3,250 $2,125 $(380) $5,835 a. Using the above data, what is the total contributed capital at year-end? (Show computations) b. How many shares of common stock were outstanding at year-end? (Show computations) c. What dollar amount of treasury stock did Speedway hold at year-end? d. What dollar amount of treasury stock did Speedway repurchase during the year? e. How much common stock did the company issue? f. What was the amount of dividends paid during the year? g. How much net income came from financing activities associated with shareholders' equity during the current year, excluding the effect of net income? (Show computations)

    1. For each of the following situations, determine (1) whether the bonds sold at face value, a premium, or at a discount, and (2) whether interest expense recognized each year for the bonds was less than, equal to, or greater than the amount of interest paid on the bonds. a. Bonds with a stated rate of 10 percent were sold t

    Annual Incremental Earnings

    1. Daily Enterprises is purchasing a $9.5 million machine. It will cost $45,000 to transport and install the machine. The machine has a depreciable life of 5 yrs and will have no salvage value. The machine will generate incremental revenues of $3.8 million per year along with incremental costs of $1.0 million per year. I

    Value per share of firm's stock

    Please help with the following problem. Provide a step by step solution. Assume that the average firm in your Company's industry is expected to grow at a constant rate of 6% and its dividend yield is 7%. Recent R&D work leads us to expect that its earnings and dividends will grow at a rate of 50% [D1 = Do(1+g) = Do(1.50)] th

    Analyzing Hasbro, Inc Financial Statements

    Obtain Hasbro, Inc's (Ticket= HAS) financial statements for its fiscal year ending December 31, 2008. Note the date. Do not use any other financials other than these, otherwise you risk answering all of the questions incorrectly. 1) Revenue growth at HASBRO was adequate in 2008 because: a) Movie tie in merchandise related

    Balance Sheet and income Statement of Different Companies

    Question 1 15-44 Earnings Statement, Retained Earnings Colgate-Palmolive Company has many well-known products, including Colgate toothpaste, Speed Stick deodorants, Softsoap, and Irish Spring soaps. The following is a reproduction of the terms and amounts in the financial statements contained in the company's annual report for

    Dividend Policies, Industry Debt Financing of Exxon and BP

    Part 1: Research at least one (2) firm who have been paying dividends.This information can be found on any reputable financial website. The companies are Exxon (xom) and BP (bp). website: ttp://finance.yahoo.com/q?s=XOM 1. Does this firm tend to be large? 2. More Mature? 3. More Profitable? 4. More Valuable? Expl

    Portfolio construction

    Suppose you believe that Coca-Cola (KO, NYSE) and PepsiCo (PEP, NYSE) are equally risky. Using the dividend discount model and data from the Internet, which of the two stocks is more attractive? Explain and discuss your answers.

    2009 financial statements - Nordstrom & Red Cross

    Obtain the financial statements for: A non-profit organization with available financial statements. A for-profit business organization -- you may select any public business by searching GOOGLE. Selected: Nordstrom & Red Cross

    Value of a share

    The Rufus Corporarion has 125 million shares outstanding and analyst expect Rufus to have earnings of $500 million this year. Rufus plans to pay out 40% of its earnings in dividends and they expect to use another 20% of their earnings to repurchase shares. If Rufus' equity cost of capital is 15% and Rufus' earnings are expected

    Stock Value for Herring Inc.

    Here are key financial data for House of Herring, Inc: Earnings per share for 2015: $5.50 Number of shares outstanding: 40 Million Target payout ratio: 50% Planned dividend per share: $2.75 Stock price, year-end 2015: $130 House of Herring plans to pay the entire dividend early in January 2015. All corporate and person

    Financial Research Report: Starbucks 2008 -2020 Financial Analysis

    Financial Research Report Instructions: Review of Financial Research Report: This assignment is an analysis of a US publicly-traded company; its common stock could be a prospective investment. Discuss the following topics: Company Overview. Conduct research and describe the company, its operations, locations, markets, a

    Preparation of Statement of Shareholder's Equity

    See attached. As of 2009, XYZ co. has the following information (millions) Authorized shares 600 Issues shares of which 431 Outstanding shares 351 Treasury shares 80 Common shares ($0.25 par) 108 Additional paid in capital 377 Accumulated retained earnings 4,433 Treasury shares

    Company Analysis: Kroger

    Please do the following points. Attached is the 10K. 1. Decompose ROE using the DuPont formula. Please include a trend analysis for the two most recent fiscal years. What does the DuPont say about changes in ROE over time? 2. Calculate the following for the two most recent fiscal years. A. Net Operating Profit after Tax

    Optimal debt level

    ** Please see the attached file for the complete problem description ** Debt level* $200,000 $500,000 Cost of debt 10% 13% Cost of equity 16% 18% EBIT $150,000 $150,000 Interest Expenses $20,000 $ EBT $130,000 $ Taxes (40%) $52,000 $ EAT $78,000

    Dividend policy & stock repurchase

    Which of the following statements is CORRECT? a. The tax code encourages companies to pay dividends. b. If a company uses the residual dividend model to determine its dividend payments, dividends payout will tend to increase whenever its profitable investment opportunities increase. c. The stronger management thinks the cli

    Business finance

    Which of the following statements about dividend policies is CORRECT? a. Modigliani and Miller argue that investors prefer dividends to capital gains because dividends are more certain than capital gains. They call this the "bird-in-the hand" effect. b. One reason that companies tend to avoid stock repurchases is that div

    Efficiency of Campaign: Rewarding Innovative Actions

    You are a manager in an organization with a deeply embedded follow-the-rules culture. The new vice president of operations has just set forth a new campaign called the Innovations Action Policy to reward innovative actions. It was established so that direct reports could be better prepared to respond to conditions. Explain why y

    Various Dividends, Stock Repurchase and Policy Questions

    1. Millman Electronics will produce 60,000 stereos next year. Variable costs will equal 50% of sales, while fixed costs will total $120,000. At what price must each stereo be sold for the company to achieve an EBIT of $95,000? $6.57 $6.87 $7.17 $7.47 $7.77 2. Firms A and B are

    Financial Management: Pepsi vs Coca Cola 2009

    Compare Pepsi & Coca-Cola. I need the financial ratios computed and interpreted. Long time competitors in the soft drink industry, PepsiCo and Coca-Cola continue efforts to gain additional market share. Which do you prefer, Coke or Pepsi? Letâ??s take a look at these two companies from a financial perspective rather than

    Financial Accounting: practice exam

    1. As a general rule, revenue is normally recognized when it is A) measurable and earned. B) measurable and received. C) realizable and earned. D) collected (the cash is received). 2. According to accounting standards, initial franchise fees should be recognized as income when: A) the franchiser has substant

    Journalizing stockholders' equity transactions

    **********PLEASE SHOW ALL CALCULATIONS*************** Airborne Manufactujring, Co., completed the following transactions during 2009: Jan 16- Declared a cash dividend on the 4%, $102 par prefferred stock (1,050 shares outstanding). Declared a $0.55 per share dividend on the 95,000 shares of common stock outstanding. The

    All Firms Pay Dividends

    A substantial percentage of the companies listed on the NYSE and the NASDAQ do not pay dividends, but investor are nonetheless willing to buy shares in them. 1. Discuss the factors that may drive this decision for an investor. 2. Explain whether or not you would recommend this behavior. Two paragraphs.

    Acct 400 study review

    1. Bad Debts Expense should be recorded a. whenever an account is written off as uncollectible. b. each time a credit sale is made. c. whenever an account written off is recovered. d. at the end of each accounting period. 2. The principles of internal control do not include: a. establishment of responsibility.

    Share purchase/cash dividend/stock dividend

    What are the major advantages of a share repurchase over a cash dividend? A. (Accounting for a stock dividend) Epson, Inc., has the common stock accounts shown here. The stock has a $38 per share market value. If Epson pays a 10% stock dividend, show the revised common stock accounts. Paid-in capital ($0.50 par value, 10

    Finance: Cash Flow Evaluation; Practice Exam Problem

    The statement of cash flows for Landsâ?? End is reproduced here: CASE 7â?" 1 LANDSâ?? END, INC. & SUBSIDIARIES Consolidated Statements of Cash Flows FOR PERIOD ENDED ($ in thousands) Year 9 Year 8 Year 7 Cash flows from operating activities Net income............................................................. $

    Downtown Merchants: Type of dividend is the extra $0.05/share

    Downtown Merchants has paid a quarterly dividend of $0.60 per share for the past two years. This quarter, the firm plans to pay $0.60 plus an additional $0.05. The firm has stated that it uncertain whether it will pay $0.60 or $0.65 per share next quarter. Which one of the following is the best description of the additional $0.0