1) Toni’s Typesetters is analyzing a possible merger with?
Pete’s Print Shop. ? Toni’s has a tax loss carryforward of $250,000?, which it
could apply to? Pete’s expected earnings before taxes of ?$125,000 per year for
the next 5 years. Using a 34?% tax? rate,
compare the earnings after taxes for? Pete’s over the next 5 years both without
and with the merger
Without the? merger, Pete’s Print? Shop’s earnings after
taxes in years 1 through 5 is ?$______. ? (Round to the nearest? dollar.)
With the? merger, the? firm’s earnings after taxes in year 1
is ?$_________. ? (Round to the nearest? dollar.)
With the? merger, the earnings after taxes in year 2 is
?$_______. ? (Round to the nearest? dollar.)
With the? merger, the earnings after taxes in years 3
through 5 is ?$_______. Round to the
nearest? dollar.)
2) Cautionary? Tales, Inc., is considering the acquisition
of Danger Corp. at its asking price of ?$140,000. Cautionary would immediately sell some of? Danger’s
assets for ?$14,000 if it makes the acquisition. Danger has a cash balance of ?$1,400 at the
time of the acquisition. If Cautionary
believes it can generate? after-tax cash inflows of ?$26,000 per year for the
next 8 years from the Danger? acquisition, should the firm make the?
acquisition? Base your recommendation on
the net present value of the outlay using? Cautionary’s 12?% cost of capital.
The net present value of the acquisition is
?$________.???(Round to the nearest? dollar.)
Based on the NPV?, should Cautionary make the?
acquisition????(Select the best answer? below.)
Yes
No
3) Ratio of exchange and EPS??Marla’s Cafe is attempting to
acquire the Victory Club. Certain
financial data on these corporations are summarized in the following table.
?(Click on the icon located on the? top-right corner of the data table below in
order to copy its contents into a? spreadsheet.)
|
Item |
?Marla’s Cafe |
Victory Club |
||
|
Earnings available for common stock |
?$25,000 |
?$6,000 |
||
|
Number of shares of common stock outstanding |
40,000 |
5,000 |
||
|
Market price per share |
?$17 |
?$28 |
Marla’s Cafe has sufficient authorized but unissued shares
to carry out the proposed merger. If the
ratio of exchange is 1.8?, what will be the earnings per share? (EPS) based on
the original shares of each? firm?
The EPS for? Marla’s original shareholders after the merger
is ?$______. ? (Round to three decimal? places.)
The EPS for? Victory’s original shareholders after the
merger is ?$_____. ?(Round to three
decimal? places.)
?4) All-Stores, Inc., is a holding company that has voting
control over both General Stores and Star Stores. ? All-Stores owns General
Stores and Star Stores common stock valued at ?$15,000 and ?$12,000?,
respectively. ? General’s balance sheet lists $130,000 of total? assets; Star
has total assets of ?$110,000. ? All-Stores has total common stock equity of
?$20,000.
a. What percentage of
the total assets controlled by? All-Stores does its common stock equity?
represent?
b. If a stockholder holds ?$5,000 worth of? All-Stores
common stock? equity, and this amount gives this stockholder voting? control,
what percentage of the total assets controlled does this? stockholder’s equity
investment? represent?
The percentage of the total assets controlled by? All-Stores
represented by its common stock equity is _______?%. ?(Round to two decimal? places.)
The percentage of the total assets controlled represented by
this? stockholder’s equity investment is _______?%. ?(Round to two decimal? places.)
5) Bankruptcy legislation—?wage-earner plan Personal Finance
Problem Jon Morgan is in a financial position where he owes more than he earns
each month. Due to his lack of financial
planning and a heavy debt? load, Jon started missing payments and saw his
credit rating plunge. Unless corrective
action is? taken, personal bankruptcy will follow.
Jon recently contacted his lawyer in order to set up a wage
earner plan with his creditors and establish a debt repayment schedule that is
workable in light of his personal income.
His creditors have all agreed to a plan under which interest payments
and late fees will be waived during the repayment period. The process would have Jon make payments to
the? court, which then will pay off his creditors.
Jon has outstanding debt of $28,100. His creditors have set a repayment period of 4
years during which monthly principal payments are required. They have waived all interest charges and
late fees. ? Jon’s yearly? take-home income is $30,400.
a. Calculate the monthly debt repayment amount.
b. Determine how much excess income Jon will have each month
after making these payments.
a. The monthly repayment amount is ?$____________. ?(Round to the nearest? cent.)
b. ? Jon’s monthly? take-home income after monthly debt
repayment is ?$__________. ?(Round to
the nearest? cent.)
6) Tax credits?A? U.S.-based MNC has a foreign subsidiary
that earns $255,000 before local? taxes, with all the? after-tax funds to be
available to the parent in the form of dividends. The applicable taxes consist of a 36% foreign
income tax? rate, a foreign dividend withholding tax rate of 9.1%?, and a U.S.
tax rate of 28%. Calculate the net funds
available to the parent MNC? if:
a. Foreign taxes can be applied as a credit against the?
MNC’s U.S. tax liability.
b. No tax credits are allowed
a. If foreign taxes can be applied as a credit against the?
MNC’s U.S. tax? liability, the net funds available to the U.S. company is
?$________. ?(Round to the nearest?
dollar.)
b. If no tax credits are? permitted, the net funds available
to the U.S. company is ?$_________. ?(Round
to the nearest? dollar.)
7) Assume that the Mexican peso currently trades at 12 pesos
to the U.S. dollar. During the year U.S.
inflation is expected to average 3?%, while Mexican inflation is expected to
average 5?%. What is the current value of
one peso in terms of U.S.? dollars?
Given the relative inflation? rates, what will the exchange rates be 1
year from? now? Which currency is
expected to appreciate and which currency is expected to depreciate over the
next? year?
The current value of one Mexican peso in terms of U.S.?
dollars, US$, is ?US$______ ?/MP. ? (Round to six decimal? places.)
Given the relative inflation? rates, the exchange rate of
one U.S. dollar in terms of Mexican? pesos, MP, one year from now will be MP
___________?/US$. ?(Round to six
decimal? places.)
Given the relative inflation? rates, the exchange rate of
one Mexican peso in terms of U.S.? dollars, US$, one year from now will be
?US$________?/MP. ? (Round to six decimal? places.)
The ___________ is
expected to? appreciate, while the _________ is expected to depreciate over the
next year.???(Select from the? drop-down menus.)
8) International investment diversification??Personal
Finance Problem???The economies of the world tend to rise and fall in cycles
that offset each other. International
stocks can provide possible diversification for a portfolio heavy on U.S.
equities. Because research on foreign
companies is usually difficult for individual investors to track on their? own,
a foreign equity mutual fund offers the investor the expertise of a global fund
manager. ? Foreign-stock funds provide exposure to overseas markets at varying
levels of risk. Economic and currency
risk can swing in a positive or negative direction. ? Hence, diversification is
the key to managing risk. Funds that
invest overseas fall into four basic? categories: global,? international,
emerging-market, and? country-specific.
The wider the reach of the? fund, the less risky it is likely to
be. Brief explain the differences
between the four funds.
Which of the following funds has enormous growth? potential,
but also poses significant? risks????(Select the best answer? below.)
A. Global fund
B. International fund
C. ?Emerging-market fund
D. ?Country-specific fund
Which of the following funds is invested in one country or
region of the world and is particularly volatile if the wrong country or region
is? selected????(Select the best answer? below.)
A. Global fund
B. International fund
C. ?Emerging-market fund
D. ?Country-specific fund
Which of the following funds is the most diverse and tends
to be the? safest????(Select the best answer? below.)
A. Global fund
B. International fund
C. ?Emerging-market fund
D. ?Country-specific fund
Which of the following fund invests most of their assets
outside the United States and can range from relatively safe to more risky
depending on the countries selected for? investment????(Select the best answer?
below.)
A. Global fund
B. International fund
C. ?Emerging-market fund
D. ?Country-specific fund
9) If Like A Lot Corp. borrows yen at a nominal annual
interest rate of 4.44?% and during the year the yen appreciates by 9.15%?, what
will the effective annual interest rate be for the? loan?
10) Denim Industries can borrow its needed financing for
expansion using one of two foreign lending facilities. It can borrow at a nominal annual interest
rate of 11?% in Mexican pesos or it can borrow at 3?% in Canadian dollars. If the peso is expected to depreciate by 10.49?%
and the Canadian dollar is expected to appreciate by 3?%, which loan has the
lower effective annual interest? rate?
The effective annual interest rate of the loan in Mexican
pesos is _____?%. ?(Round to two
decimal? places.)
The effective annual interest rate of the loan in Canadian
dollars is _______?%. ?(Round to two
decimal? places.)
Which loan has the lower effective annual interest?
rate????(Select the best answer? below.)
A.
The loan in Mexican pesos.
B.
The loan in Canadian dollars
