Activity Instruction

To enhance your understanding of financial concepts, please complete the following problems in your Corporate Finance textbook.

• Chapter 18, problem 2 (page 574).
• Chapter 19, problem 1, a through d (page 614).
• Chapter 20, problem 4a (page 640).
• Chapter 20, problem 5a (page 641).

*Please show values that were used in the formulas to compute answers*

2. Cash Equation McConnell Corp. has a book value of equity of $11,640. Long-term debt is $7,100. Net working capital, other than cash, is $2,845. Fixed assets are $14,970. How much cash does the company have? If current liabilities are $1,580, what are current assets? 1. Rights Offerings Sheary, Inc., is proposing a rights offering. Presently, there are 375,000 shares outstanding at $60 each. There will be 65,000 new shares offered at $57 each. a. b. c. d. What is the new market value of the company? How many rights are associated with one of the new shares? What is the ex-rights price? What is the value of a right? page 615 4. Using Spot and Forward Exchange Rates Suppose the spot exchange rate for the Canadian dollar is Can$1.09 and the six-month forward rate is Can$1.13 a. Which is worth more, a U.S. dollar or a Canadian dollar? 5. Cross-Rates and Arbitrage Suppose the Japanese yen exchange rate is 115 = $1, and the British pound exchange rate is 1 = $1.54 a. What is the cross-rate in terms of yen per pound? 812 UNIT 6: TEXTBOOK PROBLEMS 4 CHAPTER 18: PROBLEM 2 6 Net Worth (Equity) 7 Long-term Debt 8 Net Working Capital (Excluding Cash) 9 Fixed Assets 10 Current Liabilities $11,640 $7,100 $2,845 $14,970 $1,580 12 Cash = 13 Net Working Capital (Including Cash)- 14 Current Assets- 15 16 #NAME? # NAME ? #NAME? PTER 19: PROBLEM1 18 19 # of shares outstanding 20 Current Stock Price 21 # of new shares outstanding in the future (rights offering) 22 Price of New Stock (or rights) 23 24 25 A. New Market Value of the Company 26 B. # of Rights Needed- 27 C. Ex-Rights Price- 28 D. Value of the Right 29 375,000 $60 65,000 $57 #NAME? #NAME? # NAME? # NAME? | rights per new share CHAPTER 20: PROBLEM 4a Spot exchange rate for the Canadian Dollar 6 month forward rate U.S. Dollar $1.09 $1.13 $1.00 One Canadian Dollar is worth #NAME? | (If amount is below 1, then the U.S. Dollar is worth more and vice versa 115 Japanese Yen Exchange Rate- British Pound Exchange Rate $1 $1.54 Cross Rate in terms of Yen per Pound = #NAME