Homework Assignment #5

Chapter 17, Problem7, page 565. Cumulative voting (LO17-2) Betsy Ross owns 927 shares in the Hanson Fabrics Company. There are 15 directors to be elected. Thirty-three thousand five hundred shares are outstanding. The firm has adopted cumulative voting.

a. How many total votes can be cast?

b. How many votes does Betsy control?

c. What percentage of the total votes does she control?

Chapter 18, Problem 3, page 593. Payout ratio (LO18-1) Swank Clothiers earned $640 million last year and had a 30 percent payout ratio. How much did the firm add to its retained earnings?

Chapter 19, Problem 8, page 622. Price of a convertible bond (LO19-2) The bonds of Generic Labs Inc. have a conversion premium of $70. Their conversion price is $25. The common stock price is $22.50. What is the price of the convertible bond?

Chapter 20, Problem 1, page 647. Tax loss carryforward (LO20-1) The Clark Corporation desires to expand. It is considering a cash purchase of Kent Enterprises for $3 million. Kent has a $700,000 tax loss carryforward that could be used immediately by the Clark Corporation, which is paying taxes at the rate of 30 percent. Kent will provide $420,000 per year in cash flow (aftertax income plus depreciation) for the next 20 years. If the Clark Corporation has a cost of capital of 13 percent, should the merger be undertaken?

Chapter 21, Problem 2, page 679. Cross rates (LO21-2) Suppose a Polish zloty is selling for $0.3414 and a British pound is selling for 1.4973. What is the exchange rate (cross rate) of the Polish zloty to the British pound? That is, how many Polish zlotys are equal to a British pound?