Accounting Entity A issues $100 million 7% cumulative preference shares. Dividends are payable quarterly subject to the availability of distributable profits. Issue costs are insignificant. The preference shares are puttable at par to Entity A for cash if interest rates move by 150 basis points. Any dividend that remains accumulated and not paid becomes payable when the shares are put to Entity A. Can the put option be separated from the bonds?

Accounting Entity A issues $100 million 7% cumulative preference shares. Dividends are payable quarterly subject to the availability of distributable profits. Issue costs are insignificant. The preference shares are puttable at par to Entity A for cash if interest rates move by 150 basis points. Any dividend that remains accumulated and not paid becomes payable when the shares are put to Entity A. Can the put option be separated from the bonds?

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter15: Distributions To Shareholders: Dividends And Repurchases

Section: Chapter Questions

Problem 6MC: Suppose IWT has decided to distribute $50 million, which it presently is holding in liquid...

See similar textbooks

Similar questions

1. These dividends are payable in promissory notes and will be paid at some future date. Choices; property dividends scrip dividends cash dividends liquidating dividends 2. To record the foregoing transaction Choices; Ordinary Treasury Shares would be credited for P 30,000 Ordinary Treasury Share Premium would be credited for P 30,000 Ordinary Treasury Share Premium would be credited for P 10,000 Ordinary Share Capital would be credited for P 20,000.
1. Shares in the ownership of the company. a. Stocks b. Bonds c. Dividend d. Coupon 2. The interest-bearing security which promises to pay amount of money on a certain maturity date as stated in the bond certificate. a. Stocks b. Bonds c. Dividend d. Coupon 3. A property holding declared a dividend of P9 per share for the common stock. If the common stock closes at P76, how large is the stock yield ratio on this investment? a. 27. 17% b. 27.07% c. 11.04% d. 11.84% 4. Suppose that a bond has a face value of P100,000 and its maturity date is 10 years from now. The coupon rate is 5% payable semi-annually. Find the fair price of this bond, assuming that the annual market rate is 4%. a. 108,412.43 b. 108,612.43 c. 108,512.43 d. 108,712.43 5. Measure of a portion of the stock market a. Value of the index c. stock market index d. dividend index 6. Investors are guaranteed interest payments and return of their money at maturity b. Change of the index date. a. Stocks b. Bonds c. Dividend d.…
Genesis Company computes Basic E.P.S. as $4.00. Potential dilutors appear to be individually dilutive: convertible preferred at $3.80 and, convertible bonds at $3.84. After inclusion of the convertible preferred, the earnings per share calculation equals $3.88. After inclusion of the convertible bonds also, the earnings per share calculation equals $3.90. Genesis Company would report the following Earnings Per Share: Basic $4.00 and Diluted $3.88. Basic $4.00 and Diluted $3.90. Basic $4.00 and Diluted $3.80. Basic $4.00 only.
1. In the context of choosing a share repurchase over declaring dividends, a share repurchase woulda. Decrease available financing whereas declaring dividends increase available financing.b. Increase earnings per share by decreasing the number of shares outstanding.c. Decrease earnings per share by decreasing dividends payabled. invlove all shareholders. 2. XYZ Corp. raised P50 million from bonds and P110 million from ordinary shares. It invested P150 million of these into operating assets. Subsequently, XYZ was offered a project that is similar to its operations but requires a higher level of insurance coverage. This would require P10 million in invested capital. What is the most likely discount rate to be used for evaluating this project?a. Weighted average cost of capitalb. A project-specific rate which is the adjusted incremental cost of capitalc. Incremental cost of capitald. A project-specific rate which is the adjusted weighted average cost of capital3. During the first five…
When treasury shares are reissued at more than the reacquisition cost, the excess of the reissuance price over the cost is: * Debited to the "Share Premium – Treasury Shares" account Debited to the "Retained Earnings" account Credited to the "Share Premium – Treasury Shares" account O Credited to the "Retained Earnings" account
Consider the financial statements for the REIT given below. Assume that the net revenue includes a loss of $4,000,000 on an asset sale. This REIT has issued 1,000,000 shares. Similar REITs are trading at FFO multiples of 10x. What valuation (share price) does this information imply for the REIT? Net Revenue Less: Less: Interest expense Net income O 49.2 O 129.2 O 95.2 89.2 Operating expenses Depreciation and amortization Income from operations $20,000,000 9,800,000 4,400,000 5,800,000 $ 1,280,000 $ 4,520,000
Entity A issues $100 million 7% cumulative preference shares. Dividends are payable quarterly subject to the availability of distributable profits. Issue costs are insignificant. The preference shares are puttable at par to Entity A for cash if interest rates move by 150 basis points. Any dividend that remains accumulated and not paid becomes payable when the shares are put to Entity A. Can the put option be separated from the bonds?
ed A company has the following balance sheet (market values): Liabilities + Equity Debt Equity Assets Cash Operating Assets 600 1000 400 1200 If the firm has 300, find its fair share price after it repurchases 100 worth of shares: (round your answer to the nearest 0.01)
True or False. 1. The fixed assets are recorded in the corporation books at their gross book values. 2. 3. 4. 5. 6. 7. 8. 9. 10. The accounts receivable is recorded at net amount together with the allowance for doubtful accounts. The amount per share which a corporation agrees to pay, if it elects to redeem the stock, is called redemption price. If a corporation issues only one class of stock, this is the Preferred Stock. A corporation issuing preferred stock may at times reserve the right to redeem it later under specified conditions. Such stock is known as callable or redeemable preferred stock. There is always the possibility that a subscriber will pay part of the subscription price, and fails to pay the balance on the call date specified. In this case, the stockholder is considered to have defaulted, and the unpaid amount is called delinquent subscription. A subscriber is considered a stockholder and he possess all the rights of a stockholder. A corporation may reacquire some of…
S1: The calculation of diluted EPS assumes that share options were exercised ant that the proceeds were used to buy treasury shares. S2: When applying the treasury share method for diluted EPS, the average market price of the ordinary share during the year is normally used as the assumed acquisition of treasury shares. A. both are trueB. both are falseC. S1 is trueD. S2 is true Note: EPS is Earnings Per Share.
B. TRUE OR FALSE: Write TRUE if the statement is correct; if incorrect, write FALSE. 1. Preferred stockholders get cash dividends before common stockholders. 2. A financial asset is any contract that reflects a residual stake in an entity's assets after all liabilities have been paid. 3. Interest rates on treasury bonds are often higher than those on corporate bonds. 4. A 10-year T-bond is a money market instrument. 5. A public offering is the selling of new securities to the general public, whereas an initial public offering (IPO) is the first issuance of shares. 6. Insurance companies pool payments and invest the proceeds in a variety of securities until funds are required to settle policyholder claims. 7. Financial markets give capital for financial managers to support business progress and development. 8. BSP is in charge of supervising a country's monetary system and policies, managing its money supply, and determining interest rates. 9. The stock price is used to determine the…
Share Premium account is recorded as a credit when- a) Shares are sold higher than par value b) Shares are sold less than the par value c) Shares are sold at par value d) All of these