Advanced Financial Management Test Preparation
Course Introduction
Advanced Financial Management delves into the principles and practices involved in the strategic financial decision-making process of firms. The course covers topics such as capital budgeting, capital structure, dividend policy, risk management, mergers and acquisitions, working capital management, and international financial management. Emphasis is placed on the application of advanced analytical tools and models to evaluate financial strategies, assess corporate value, and optimize the allocation of resources amid changing markets and economic environments. Through case studies and real-world examples, students develop a comprehensive understanding of complex financial scenarios and sharpen skills necessary for effective financial planning and control in both domestic and global contexts.
Recommended Textbook
Intermediate Financial Management 12th Edition by Eugene F. Brigham
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32 Chapters
1966 Verified Questions
1966 Flashcards
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Page 2
Chapter 1: An Overview of Financial Management and the Financial Environment
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Sample Questions
Q1) Which of the following statements is CORRECT?
A)It is generally more expensive to form a proprietorship than a corporation because, with a proprietorship, extensive legal documents are required.
B)Corporations face fewer regulations than sole proprietorships.
C)One disadvantage of operating a business as a sole proprietorship is that the firm is subject to double taxation, at both the firm level and the owner level.
D)One advantage of forming a corporation is that equity investors are usually exposed to less liability than in a regular partnership.
E)If a regular partnership goes bankrupt, each partner is exposed to liabilities only up to the amount of his or her investment in the business.
Answer: D
Q2) If a firm's goal is to maximize its earnings per share,this is the best way to maximize the price of the common stock and thus shareholders' wealth.
A)True
B)False
Answer: False
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Chapter 2: Risk and Return: Part I
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Sample Questions
Q1) A firm can change its beta through managerial decisions,including capital budgeting and capital structure decisions.
A)True
B)False
Answer: True
Q2) Donald Gilmore has $100,000 invested in a 2-stock portfolio.$35,000 is invested in Stock X and the remainder is invested in Stock Y.X's beta is 1.50 and Y's beta is 0.70.What is the portfolio's beta?
A)0.65
B)0.72
C)0.80
D)0.89
E)0.98
Answer: E
Q3) We would generally find that the beta of a single security is more stable over time than the beta of a diversified portfolio.
A)True
B)False
Answer: False
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Page 4
Chapter 3: Risk and Return: Part Ii
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Sample Questions
Q1) Your mother's well-diversified portfolio has an expected return of 12.0% and a beta of 1.20.She is in the process of buying 100 shares of Safety Corp.at $10 a share and adding it to her portfolio.Safety has an expected return of 15.0% and a beta of 2.00.The total value of your current portfolio is $9,000.What will the expected return and beta on the portfolio be after the purchase of the Safety stock? r<sub>p</sub> b<sub>p</sub>
A)11.69%; 1.22
B)12.30%; 1.28
C)12.92%; 1.34
D)13.56%; 1.41
E)14.24%; 1.48
Answer: B
Q2) The slope of the SML is determined by the value of beta.
A)True
B)False Answer: False
Q3) A stock with a beta equal to 1.0 has zero systematic (or market)risk.
A)True
B)False
Answer: False
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Page 5
Chapter 4: Bond Valuation
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Sample Questions
Q1) Curtis Corporation's noncallable bonds currently sell for $1,165.They have a 15-year maturity,an annual coupon of $95,and a par value of $1,000.What is their yield to maturity?
A)6.20%
B)6.53%
C)6.87%
D)7.24%
E)7.62%
Q2) Which of the following events would make it more likely that a company would choose to call its outstanding callable bonds?
A)Market interest rates rise sharply.
B)Market interest rates decline sharply.
C)The company's financial situation deteriorates significantly.
D)Inflation increases significantly.
E)The company's bonds are downgraded.
Q3) For bonds,price sensitivity to a given change in interest rates is generally greater the longer before the bond matures.
A)True
B)False
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Page 6
Chapter 5: Financial Options
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Q1) The current price of a stock is $50,the annual risk-free rate is 6%,and a 1-year call option with a strike price of $55 sells for $7.20.What is the value of a put option,assuming the same strike price and expiration date as for the call option?
A)$7.33
B)$7.71
C)$8.12
D)$8.55
E)$9.00
Q2) An investor who writes standard call options against stock held in his or her portfolio is said to be selling what type of options?
A)Put
B)Naked
C)Covered
D)Out-of-the-money
E)In-the-money
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Chapter 6: Accounting for Financial Management
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Q1) Swinnerton Clothing Company's balance sheet showed total current assets of $2,250,all of which were required in operations.Its current liabilities consisted of $575 of accounts payable,$300 of 6% short-term notes payable to the bank,and $145 of accrued wages and taxes.What was its net operating working capital that was financed by investors?
A)$1,454
B)$1,530
C)$1,607
D)$1,687
E)$1,771
Q2) Which of the following items is NOT included in current assets?
A)Short-term, highly liquid, marketable securities.
B)Accounts receivable.
C)Inventory.
D)Bonds.
E)Cash.
Q3) Total net operating capital is equal to net fixed assets.
A)True
B)False
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Page 8
Chapter 7: Analysis of Financial Statements
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Q1) Since the ROA measures the firm's effective utilization of assets (without considering how these assets are financed),two firms with the same EBIT must have the same ROA.
A)True
B)False
Q2) If the CEO of a large,diversified,firm were filling out a fitness report on a division manager (i.e.,"grading" the manager),which of the following situations would be likely to cause the manager to receive a better grade? In all cases,assume that other things are held constant.
A)The division's DSO (days' sales outstanding) is 40, whereas the average for its competitors is 30.
B)The division's basic earning power ratio is above the average of other firms in its industry.
C)The division's total assets turnover ratio is below the average for other firms in its industry.
D)The division's debt ratio is above the average for other firms in the industry.
E)The division's inventory turnover is 6, whereas the average for its competitors is 8.
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Chapter 8: Basic Stock Valuation
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Sample Questions
Q1) Founders' shares are a type of classified stock where the shares are owned by the firm's founders,and they generally have more votes per share than the other classes of common stock.
A)True
B)False
Q2) A company is expected to have free cash flows of $0.75 million next year.The weighted average cost of capital is WACC = 10.5%,and the expected constant growth rate is g = 6.4%.The company has $2 million in short-term investments,$2 million in debt,and 1 million shares.What is the stock's current intrinsic stock price?
A)$17.39
B)$17.84
C)$18.29
D)$18.75
E)$19.22
Q3) Free cash flows should be discounted at the firm's weighted average cost of capital to find the value of its operations.
A)True
B)False
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Chapter 9: Corporate Valuation and Financial Planning
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Sample Questions
Q1) Which of the following statements is CORRECT?
A)Suppose a firm is operating its fixed assets at below 100% of capacity, but it has no excess current assets. Based on the AFN equation, its AFN will be larger than if it had been operating with excess capacity in both fixed and current assets.
B)If a firm retains all of its earnings, then it cannot require any additional funds to support sales growth.
C)Additional funds needed (AFN) are typically raised using a combination of notes payable, long-term debt, and common stock. Such funds are non-spontaneous in the sense that they require explicit financing decisions to obtain them.
D)If a firm has a positive free cash flow, then it must have either a zero or a negative AFN.
E)Since accounts payable and accrued liabilities must eventually be paid off, as these accounts increase, AFN as calculated by the AFN equation must also increase.
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11
Chapter 10: Corporate Governance
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Sample Questions
Q1) ESOPs were originally designed to help improve worker productivity,but today they are also used to help prevent hostile takeovers.
A)True
B)False
Q2) Which of the following is NOT normally regarded as being a barrier to hostile takeovers?
A)Targeted share repurchases.
B)Shareholder rights provisions.
C)Restricted voting rights.
D)Poison pills.
E)Abnormally high executive compensation.
Q3) A poison pill is also known as a corporate restructuring.
A)True
B)False
Q4) Two important issues in corporate governance are (1)the rules that cover the board's ability to fire the CEO and (2)the rules that cover the CEO's ability to remove members of the board.
A)True
B)False
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Chapter 11: Determining the Cost of Capital
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Sample Questions
Q1) The before-tax cost of debt,which is lower than the after-tax cost,is used as the component cost of debt for purposes of developing the firm's WACC.
A)True
B)False
Q2) Which of the following statements is CORRECT?
A)The percentage flotation cost associated with issuing new common equity is typically smaller than the flotation cost for new debt.
B)The WACC as used in capital budgeting is an estimate of the cost of all the capital a company has raised to acquire its assets.
C)There is an "opportunity cost" associated with using reinvested earnings, hence they are not "free."
D)The WACC as used in capital budgeting would be simply the after-tax cost of debt if the firm plans to use only debt to finance its capital budget during the coming year.
E)The WACC as used in capital budgeting is an estimate of a company's before-tax cost of capital.
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Chapter 12: Capital Budgeting: Decision Rules
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Sample Questions
Q1) No conflict will exist between the NPV and IRR methods,when used to evaluate two equally risky but mutually exclusive projects,if the projects' cost of capital exceeds the rate at which the projects' NPV profiles cross.
A)True
B)False
Q2) Which of the following statements is CORRECT? Assume that all projects being considered have normal cash flows and are equally risky.
A)If a project's IRR is equal to its WACC, then under all reasonable conditions, the project's IRR must be negative.
B)If a project's IRR is equal to its WACC, then under all reasonable conditions the project's NPV must be zero.
C)There is no necessary relationship between a project's IRR, its WACC, and its NPV.
D)When evaluating mutually exclusive projects, those projects with relatively long lives will tend to have relatively high NPVs when the cost of capital is relatively high.
E)If a project's IRR is equal to its WACC, then, under all reasonable conditions, the project's NPV must be negative.
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Page 14
Chapter 13: Cash Flow Estimation and Risk Analysis
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Sample Questions
Q1) McPherson Company must purchase a new milling machine.The purchase price is $50,000,including installation.The machine has a tax life of 5 years,and it can be depreciated according to the following rates.The firm expects to operate the machine for 4 years and then to sell it for $12,500.If the marginal tax rate is 40%,what will the after-tax salvage value be when the machine is sold at the end of Year 4?
\[\begin{array} { c c }
\text { Year } & \text { Depreciation Rate } \\
\hline 1 & 0.20 \\
2 & 0.32 \\
3 & 0.19 \\
4 & 0.12 \\ 5 & 0.11 \\
6 & 0.06
\end{array}\]
A)$8,878
B)$9,345
C)$9,837
D)$10,355
E)$10,900
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Page 15
Chapter 14: Real Options
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Sample Questions
Q1) Refer to Exhibit 14.3.Based on the above data,what is the project's net present value?
A) $1,312,456
B) $1,104,607
C) $875,203
D)$105,999
E)$321,788
Q2) Which one of the following is an example of a "flexibility" option?
A)A company has an option to close down an operation if it turns out to be unprofitable.
B)A company agrees to pay more to build a plant in order to be able to change the plant's inputs and/or outputs at a later date if conditions change.
C)A company invests in a project today to gain knowledge that may enable it to expand into different markets at a later date.
D)A company invests in a jet aircraft so that its CEO, who must travel frequently, can arrive for distant meetings feeling less tired than if he had to fly commercial.
E)A company has an option to invest in a project today or to wait a year.
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16
Chapter 15: Distributions to Shareholders: Dividends and Repurchases
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Sample Questions
Q1) Consider two very different firms,M and N.Firm M is a mature firm in a mature industry.Its annual net income and net cash flows are both consistently high and stable.However,M's growth prospects are quite limited,so its capital budget is small relative to its net income.Firm N is a relatively new firm in a new and growing industry.Its markets and products have not stabilized,so its annual operating income fluctuates considerably.However,N has substantial growth opportunities,and its capital budget is expected to be large relative to its net income for the foreseeable future.Which of the following statements is correct?
A)Firm M probably has a higher dividend payout ratio than Firm N.
B)If the corporate tax rate increases, the debt ratio of both firms is likely to decline.
C)The two firms are equally likely to pay high dividends.
D)Firm N is likely to have a clientele of shareholders who want to receive consistent, stable dividend income.
E)Firm M probably has a lower debt ratio than Firm N.
Q2) A reverse split reduces the number of shares outstanding.
A)True
B)False
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Chapter 16: Capital Structure Decisions
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Q1) Refer to Exhibit 16.3.Now assume that BB is considering changing from its original capital structure to a new capital structure with 45% debt and 55% equity.This results in a weighted average cost of capital equal to 10.4% and a new value of operations of $576,923.Assume BB raises $259,615 in new debt and purchases T-bills to hold until it makes the stock repurchase.What is the stock price per share immediately after issuing the debt but prior to the repurchase?
A)$14.42
B)$19.36
C)$23.91
D)$28.85
E)$35.62
Q2) Two firms,although they operate in different industries,have the same expected earnings per share and the same standard deviation of expected EPS.Thus,the two firms must have the same business risk.
A)True
B)False
Q3) Whenever a firm borrows money,it is using financial leverage.
A)True
B)False
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Page 18
Chapter 17: Dynamic Capital Structures and Corporate Valuation
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Q1) MM showed that in a world without taxes,a firm's value is not affected by its capital structure.
A)True B)False
Q2) The Miller model begins with the MM model with taxes and then adds personal taxes. A)True B)False
Q3) In the MM extension with growth,the appropriate discount rate for the tax shield is the after-tax cost of debt.
A)True B)False
Q4) Refer to Exhibit 17.1.What is the value of the firm according to MM with corporate taxes?
A)$475,875
B)$528,750
C)$587,500
D)$646,250
E)$710,875
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Chapter 18: Initial Public Offerings, investment Banking, and Financial Restructuring
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Q1) Stanovich Enterprises has 10-year,12.0% semiannual coupon bonds outstanding.Each bond is now eligible to be called at a call price of $1,060.If the bonds are called,the company must replace them with new 10-year bonds.The flotation cost of issuing new bonds is estimated to be $45 per bond.How low would the yield to maturity on the new bonds have to be in order for it to be profitable to call the bonds today,i.e.,what is the nominal annual "breakeven rate"?
A)9.29%
B)9.78%
C)10.29%
D)10.81%
E)11.35%
Q2) The term "leaving money on the table" refers to the situation where an investment banking house makes a very low bid for the right to underwrite a firm's new stock offering.The banker is,in effect,"buying the job" with the low bid and thus not getting all the money his firm would normally earn on the job.
A)True
B)False
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Page 20
Chapter 19: Lease Financing
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Q1) Leasing is often referred to as off-balance sheet financing because lease payments are shown as operating expenses on a firm's income statement and,under certain conditions,leased assets and associated liabilities do not appear on the firm's balance sheet.
A)True
B)False
Q2) Under a sale and leaseback arrangement,the seller of the leased property is the lessee and the buyer is the lessor.
A)True
B)False
Q3) In the lease versus buy decision,leasing is often preferable
A)because, generally, no down payment is required, and there are no indirect interest costs.
B)because lease obligations do not affect the firm's risk as seen by investors.
C)because the lessee owns the property at the end of the least term.
D)because the lessee may have greater flexibility in abandoning the project in which the leased property is used than if the lessee bought and owned the asset.
E)because it has no effect on the firm's ability to borrow to make other investments.
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Chapter 20: Hybrid Financing: Preferred Stock, Warrants, and Convertibles
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Q1) Most convertible securities are bonds or preferred stocks that,under specified terms and conditions,can be exchanged for common stock at the option of the holder.
A)True
B)False
Q2) Many preferred stocks extend voting rights to preferred shareholders if the preferred dividend has been omitted for some specified period,for example,4 quarters.
A)True
B)False
Q3) Convertible debentures for Kulik Corporation were issued at their $1,000 par value in 2012.At any time prior to maturity on February 1,2032,a debenture holder can exchange a bond for 25 shares of common stock.What is the conversion price,P<sub>c</sub>?
A)$40.00
B)$42.00
C)$44.10
D)$46.31
E)$48.62
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22
Chapter 21: Supply Chains and Working Capital Management
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Q1) Noddings Inc.needs to raise more capital because its business is booming.The company purchases supplies on terms of 1/10 net 20,and it currently takes the discount.One way of getting the needed funds would be to forgo the discount,and the firm's owner believes she could delay payment to 40 days without adverse effects.What would be the effective annual percentage cost of funds raised by this action? (Assume a 365-day year.)
A)10.59%
B)11.15%
C)11.74%
D)12.36%
E)13.01%
Q2) The risk to the firm of borrowing using short-term credit is usually greater than if it used long-term debt.Added risk stems from (1)the greater variability of interest costs on short-term than long-term debt and (2)the fact that even if its long-term prospects are good,the firm's lenders may not be willing to renew short-term loans if the firm is temporarily unable to repay those loans.
A)True B)False
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Chapter 22: Providing and Obtaining Credit
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Q1) The collection process,although sometimes difficult,is a fairly inexpensive component of doing business.
A)True
B)False
Q2) No Tree Too Tall,Inc.is planning to borrow $12,000 from the bank.The bank offers the choice of a 12 percent discount interest loan or a 10.19 percent add-on,one-year installment loan,payable in 4 equal quarterly payments.What is the effective rate of interest on the 10.19 percent add-on loan?
A)9.50%
B)10.19%
C)15.22%
D)16.99%
E)22.05%
Q3) Refer to Exhibit 27.3.What would be the cost to Van Doren of the discounts taken?
A)$116,750
B) $108,750
C)$155,000
D)$225,000
E)$260,500
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24
Chapter 23: Advanced Issues in Cash Management and Inventory Control
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Q1) If a company increases its safety stock,then its average inventory will go up.
A)True
B)False
Q2) Refer to Exhibit 23.1.According to the Baumol model,what is the optimal transaction size for transfers from marketable securities to cash?
A)$7,071
B)$38,357
C)$70,711
D)$102,956
E)$87,000
Q3) For some firms,holding highly liquid marketable securities is a substitute for holding cash because a marketable securities portfolio can accomplish the same objective as cash.
A)True B)False
Q4) If a company increases its safety stock,then its EOQ will go up. A)True B)False
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Chapter 24: Enterprise Risk Management
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Q1) Which of the following are NOT ways risk management can be used to increase the value of a firm?
A)Risk management can help a firm maintain its optimal capital budget.
B)Risk management can reduce the expected costs of financial distress.
C)Risk management can help firms minimize taxes.
D)Risk management can allow managers to defer receipt of their bonuses and thus postpone tax payments.
E)Risk management can increase debt capacity.
Q2) Company A can issue floating-rate debt at LIBOR + 1% and can issue fixed rate debt at 9%.Company B can issue floating-rate debt at LIBOR + 1.5% and can issue fixed-rate debt at 9.4%.Suppose A issues floating-rate debt and B issues fixed-rate debt,after which they engage in the following swap: A will make a fixed 7.95% payment to B,and B will make a floating-rate payment equal to LIBOR to A.What are the resulting net payments of A and B?
A)A pays a fixed rate of 9%, B pays LIBOR + 1.5%.
B)A pays a fixed rate of 8.95%, B pays LIBOR + 1.45%.
C)A pays LIBOR plus 1%, B pays a fixed rate of 9.4%.
D)A pays a fixed rate of 7.95%, B pays LIBOR.
E)None of the above answers is correct.
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Chapter 25: Bankruptcy, reorganization, and Liquidation
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Q1) Which of the following statements is most CORRECT?
A)The primary test of feasibility in a reorganization is whether every claimant agrees with the reorganization plan.
B)The basic doctrine of fairness states that all debtholders must be treated equally.
C)Since the primary issue in bankruptcy is to determine the sharing of losses between owners and creditors, the "public interest" is not a relevant concern.
D)While a firm is in bankruptcy, the existing management is always allowed to retain control, though the court will monitor its actions closely.
E)To a large extent, the decision to dissolve a firm through liquidation versus keeping it alive through reorganization depends on a determination of the value of the firm if it is rehabilitated versus the value of its assets if they are sold off individually.
Q2) Even if a firm's cash flow projections indicate that it will soon be unable to meet its interest payments,a bankruptcy case cannot begin until the firm actually defaults on a scheduled payment.
A)True
B)False
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Chapter 26: Mergers and Corporate Control
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Q1) Which of the following statements is most CORRECT?
A)Regulations in the United States prohibit acquiring firms from using common stock to purchase another firm.
B)Defensive mergers are designed to make a company less vulnerable to a takeover.
C)Hostile mergers always create value for the acquiring firm.
D)In a tender offer, the target firm's management always remain after the merger is completed.
E)A conglomerate merger is one where a firm combines with another firm in the same industry.
Q2) The distribution of synergistic gains between the stockholders of two merged firms is almost always based strictly on their respective market values before the announcement of the merger.
A)True
B)False
Q3) Post-merger control and the negotiated price paid by the acquirer are two of the most important issues in agreeing on the terms of a merger.
A)True
B)False
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Chapter 27: Multinational Financial Management
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Q1) Calculating a currency cross rate involves determining the exchange rate for two currencies by using a third currency as a base.
A)True
B)False
Q2) Exchange rate risk is the risk that the cash flows from a foreign project,when converted to the parent company's currency,will be worth less than was originally projected because of exchange rate changes.
A)True
B)False
Q3) Individuals and corporations can buy or sell forward currencies to hedge their exchange rate exposure.Essentially,the process involves simultaneously selling the currency expected to appreciate in value and buying the currency expected to depreciate.
A)True
B)False
Q4) A Eurodollar is a U.S.dollar deposited in a bank outside the United States.
A)True
B)False
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Chapter 28: Time Value of Money
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Q1) Partners Bank offers to lend you $50,000 at a nominal rate of 5.0%,simple interest,with interest paid quarterly.An offer to lend you the $50,000 also comes from Community Bank,but it will charge 6.0%,simple interest,with interest paid at the end of the year.What's the difference in the effective annual rates charged by the two banks?
A)1.56%
B)1.30%
C)1.09%
D)0.91%
E)0.72%
Q2) Your bank offers a 10-year certificate of deposit (CD)that pays 6.5% interest,compounded annually.If you invest $2,000 in the CD,how much will you have when it matures?
A)$3,754.27
B)$3,941.99
C)$4,139.09
D)$4,346.04
E)$4,563.34
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Chapter 29: Basic Financial Tools: a Review
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Q1) Stocks A and B are quite similar: Each has an expected return of 12%,a beta of 1.2,and a standard deviation of 25%.The returns on the two stocks have a correlation of 0.6.Portfolio P has 50% in Stock A and 50% in Stock B.Which of the following statements is CORRECT?
A)Portfolio P has a standard deviation that is greater than 25%.
B)Portfolio P has an expected return that is less than 12%.
C)Portfolio P has a standard deviation that is less than 25%.
D)Portfolio P has a beta that is less than 1.2.
E)Portfolio P has a beta that is greater than 1.2.
Q2) Disregarding risk,if money has time value,it is impossible for the future value of a given sum to exceed its present value.
A)True
B)False
Q3) Any change in its beta is likely to affect the required rate of return on a stock,which implies that a change in beta will likely have an impact on the stock's price,other things held constant.
A)True
B)False
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31
Chapter 30: Pension Plan Management
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Q1) Arnold Rossiter is a 40-year-old employee of the Barrington Company who will retire at age 60 and expects to live to age 75.The firm has promised a retirement income of $20,000 at the end of each year following retirement until death.The firm's pension fund is expected to earn 7 percent annually on its assets and the firm uses 7% to discount pension benefits.What is Barrington's annual pension contribution to the nearest dollar for Mr.Rossiter? (Assume certainty and end-of-year cash flows.)
A)$2,756
B)$3,642
C)$4,443
D)$4,967
E)$5,491
Q2) The performance measurement of stock portfolio managers must recognize the risk inherent in the investment portfolio.One way to incorporate risk into performance measurement is to examine the portfolio's alpha,which measures the vertical distance of the portfolio's return above or below the Security Market Line.
A)True
B)False
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Businesses
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Q1) Which of the following statements about project risk analysis in not-for-profit firms is incorrect?
A)A project's corporate beta measures the contribution of the project to the overall corporate risk of the firm.
B)A project's corporate beta is found (at least conceptually) by regressing returns on the project against returns on the market portfolio.
C)A project's corporate beta is defined as ( <sub>P</sub>/ <sub>F</sub>)r<sub>PF</sub>, where <sub>P</sub> is the standard deviation of the project's returns, <sub>F</sub> is the standard deviation of the firm's returns, and r<sub>PF</sub> is the correlation among the two sets of returns.
D)In practice, it is usually difficult, if not impossible, to directly measure a project's corporate risk, so project risk analysis typically focuses on stand-alone risk.
E)The market risk of a project is not relevant to not-for-profit firms.
Q2) Since not-for-profit firms do not pay taxes,they receive no tax benefits whatsoever from using debt financing.
A)True
B)False
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Page 33
Chapter 32: a Values of the Areas Under the Standard
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Q1) Pietersen Corporation must raise an additional $10,000,000 of equity capital through the sale of common stock in order to finance the construction of a new plant.The firm currently has an EPS of $5.40 and a P/E ratio of 10,with 1,200,000 shares outstanding.The firm will offer new shares to its current stockholders at $40 per share.Find (1)the number of new shares to be issued, (2)the ex-rights price of the stock (assuming that the new market value of the stock will simply be the proceeds of the new issue plus the current value of equity,divided by new shares outstanding),and (3)the value of one right. \(\text {New Shs}\) \(\quad \)\(\text {Ex-rights}\) \(\quad \) \(\text {Rights}\)
a. \(200,000 \quad \quad \$ 39.65 \quad\quad \$ 1.38\)
b. \(230,000 \quad\quad \$ 40.25 \quad \quad \$ 1.85\)
c. \(230,000 \quad \quad \$ 42.65 \quad \quad \$ 2.16\)
d. \(250,000 \quad \quad \$ 51.59 \quad \quad \$ 2.41\)
e. \(250,000 \quad \quad \$ 46.65 \quad \quad \$ 2.78\)
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