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Similarities and differences between convertible debt

Discuss similarities and the differences between convertible debt and debt issued with stock warrants. In the absence of restrictive provisions, what are the basic rights of stockholders of a corporation. Why is a preemptive right important

EPS with Convertible Bonds & Preferred Stock

The Ottey Corporation issued 10-year, $1,000,000 par, 7% callable convertible subordinated debentures on January 2, 2010. The bonds have a par value of $1,000, with interest payable annually. The current conversion ratio is 14:1, and in 2 years it will increase to 18:1. At the date of issue, the bonds were sold at 98. Bond disco

EPS, tax rate and Dividends - Reel Envy Corporation and Gold Reel Corporation

Reel Envy Corporation The Controller of Reel Envy (registered trademark) Corporation has given you the responsibility of calculating the earnings per share figures for the year ended 12-31-08. The information provided to you discloses the following: 1. Common stock at 1-1-08, stated value $2, authorized 5,000,000 shares;

Improving PC Services of Oshkosh Truck Corp.

Read the case carefully and answer the included questions in detail. 1. What are some of factors that contributed to Oshkosh Truck Corp's need to improve its PC services? 2. Which end users did the improvements help most? 3. What are some of the challenges that were encountered in the implementation of the improvements?

Statement of Cash Flows with related footnote disclosures.

CARIBOU The following information was taken from the accounting records of the Caribou Company: Account Balances January 1, 2010 December 31, 2010 Debits Cash $ 1,400 $ 2,400 Accounts receivable (net) 2,800 2,690 Marketable securities (at cost) 1,700 3,000 Allowance for change in value 500 800 Inventories 8,100 7

Use of futures and options hedging strategies for an oil producer

Risk management Question: You are the risk manager of an energy producing company. Your firm explores for and extracts crude oil. Your firm regularly produces approximately 50,000 barrels of oil monthly. You watch the energy markets closely and determine in early May 2011 that the current market price of $110 per barrel mayb

Stock option controversy

How does the controversy over stock option accounting affect the duties of a C.P.A? What are your thoughts on this controversy?

Bonds straight value

The following data apply to Saunders Corporation's convertible bonds. Maturity 10 Stock price $30.00 Par value $1,000 Conversion price $50.00 Annual coupon 7.00% Straight-debt yield 8.00% What is the bond's straight-debt value at the time of issue?

Currency put options

Alice bought a put option on British pounds for $.04 per unit. The strike price was $1.80, and the spot rate at the time the pound option was exercised was $1.59. Assume that there are 31,250 units in a British pound option. What was Alice's net profit on the option?

Why Governments Do Not Issue Stocks

Governments do not issue stocks because: they cannot sell ownership claims they cannot sell debt claims the Constitution expressly prohibits it they cannot compete effectively with corporations relative to profits

Finance: risk neutral probabilities, and value of equity

Review Questions. 10-2 and 10-3 (attached) ---------------- Given Available gas (MCF) 50,000,000 Price of Gas (today) $14.03 per MCF Gas Price Next Year High $18.16 Low $12.17 Forward price for next year $14.87 Development cost per MCF $4.00 Debt (on the property) $450,000,000 In

Graphing Profit and Breakeven Point

The following option price information can be used to answer questions. Assume interest rates are 2%. Apple (AAPL) Stock Price $330.67 Option Prices (7-months until expiration) K Put Call 300 22.05 22.05 330 34.90 36.50 360 51.60 23.35 1. Graph the Profit of the following positions at expiration as a function

Energy Trading: Example Problem

Suppose you constructed a bull call spread contract using March natural gas futures (size: 10,000 MMBtu). Call premium is $0.30 for $4.20 strike price per MMBtu. Call premium is $0.25 for $4.50 strike price per MMBtu. Compute your net profit or loss per contract (10,000 MMBtu) for the following possible March natural gas futures

Business Taxation (USA Only)

(1). FACTS: Assume that you are the controller for MetroCorp LTD. The board of Directors is considering the adoption of a stock option plan. They have asked you to prepare an explanation of a qualified stock option plan and a nonqualified stock option option does not have an ascertainable fair market value). Assume that the curr

Put-call parity - The Keller Fund's Option Investment Strategies

Harvard Business Case: 9-295-096 January 19, 1995 The Keller Fund's Option Investment Strategies 1. If you owned Lotus's stock, but were concerned about the possibility of bad news, how might you use options to protect yourself against the risk of a price decline? 2. Suppose on January 18, 1994, the daily yield to matur

Explain why preferred stock is sometimes considered a hybrid

Explain why preferred stock is sometimes considered a hybrid security (i.e part stock/part bond). Also explain if the equation used to value preferred stock is more like for bonds previously or more like the constant growth model for common equity.

Employee Stock Option Question

How is it possible for an employee stock option to be valuable even if the firm's stock price fails to meet shareholder's expectations?

Put-Call Parity, Options and Arbitrage

Question 1 What is put-call parity and why does it hold? Please show your proof? Question 2 The following prices are observed. How are you going to profit from the opportunity? Stock A is selling for $95.00 Call options on stock A with exercise price of 90 and with April expiration are selling for $9 per share Put opt

Which company is better and why?

Assume that you have decided to invest a portion of your money in the stock market. You ask your broker to recommend a couple of preferred stocks for you to consider as an investment. Your broker recommends the following two companies. Both are start-up corporations, but you agree with your broker that both have excellent potent

Historical trends for small capitalization stocks this year

If this year is consistent with historical trends you would expect the return for small capitalization stocks to be: a. Below common stocks and above long-term government bonds. b. Below common stocks and below long-term government bonds. c. Above last year's return on the same stocks. d. Above common stock, long-term go

Short Position, Calls, Puts, & Portfolio Insurance

1. If you have a short position on a call option with a strike price of $53.50 and the stock price is $55.50 at the expiration date and the holder of the option exercise the option, what will be the result to you? a. You can cancel the transaction because the strike price is less than the stock price. b. You can buy the stoc