Occidental Oman has issued a new bond, which has increased the company’s debt/ equity ratio from 33 percent to 53 percent. You are a stockholder in Occidental Oman. Discuss how this change would affect your required rate of return on the common stock of the Occidental Oman. Why?
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Occidental Oman has issued a new bond, which has increased the company’s debt/ equity ratio from 33 percent to 53 percent. You are a stockholder in Occidental Oman. Discuss how this change would affect your required
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- You own stocks in an oil palm plantation company, and you read in the financial press that a recent bond offering has raised the firm’s debt-equity ratio from 30 percent to 55 percent. Discuss how this change would affect your required rate of return on the common stock of the company. Provide your justification(s) to support your views in the answer space provided.After reviewing this week's content, when you think about securities (i.e., stock and bond) valuation, you should be able to view securities from both an investor's perspective as well as a corporation's perspective. Explain how an investor's expected rate of return on a stock and a bond is linked to an organization's required rate of return on that stock and bond. In addition, provide an example of a company whose stock (Note: You could use Yahoo!Finance to search for companies and their historical performance) was affected when it released its earnings (i.e., 10K-Annual Report or 10Q-Quarterly Report) and indicate, from a business perspective, why the value of that company's equity fell or rose as a result of a business outcome.3. My Stock- Dicks sporting goods (DKS) Your task in this week's discussion is to find the debt to equity ratio for your company and its competitor. Analyze the results of your findings. In addition, you are asked to dig deeper and describe at least one of the bonds pertaining to your company. Specifically: What type of bond is it? When was it issued? How much was the issuance? What is coupon rate? When is it due? Be certain to reference your sources.
- You are an investment adviser. One of your clients approaches you for your advice on investing in equity shares of Alpha Company. You have collected the following data: Earnings per share last year $6.00 Payout ratio 0.40 Return on equity 0.30 Cost of equity capital 0.20 The company plans to increase the payout ratio to 60% from year 5. Required: i) Estimate the price of an equity share of this company using an appropriate dividend discount model and advise your client whether they should buy a share of the company. ii) Your client is keen to know whether there are any positive growth opportunities from their investment. Explain to your client the meaning of this concept using appropriate calculations. Notes: You need to show detailed calculations in order to receive full marks for this question iii)If there are positive or negative growth opportunities, explain the reason for such opportunities.How would this example look in the basic accounting equation?Investors selling their own stock to other investors for 140$ per share of stock.What are the four major components of stockholders' equity? Explain each component. (Click the icon to view a list of possible explanations.) (Select the four major components of stockholders' equity and the explanation that best describes each component.) 1. 2. 3. 4. Major component Explanations Explanation a. Includes the cumulative record of: unrealized gains and losses on investment securities, unrealized pension costs, and unrealized foreign currency translation gains or losses. b. An amount that will be due within the next reporting period. c. Includes the capital stock sold by the entity at face or par value and amounts received above par value. d. The historical record of earnings that have not been paid out or distributed as dividends to shareholders. e. The amount of cash stockholders withdraw from the company's bank account. f. The amount of the subsidiary's net assets owned by outside shareholders. X
- Assume that the return on tax-exempt securities is 0.09 and that tp = 0.3, tg = 0.15, and te = 0.35, where tg is the rate on capital gains, te is the corporate tax rate, and to is the personal tax rate on dividends and interest. Equilibrium conditions exist. a. The return to investors on taxable bonds raised as new capital can be expected to be b. The return to investors on common stock (all capital gains) raised as new capital can be expected to be c. If taxable debt is issued, the company will have to earn before tax, and if common stock is issued the firm will have to earn before tax. d. If taxable debt is issued, the company will have to earn before tax, and if common stock is issued the firm will have to earn before tax.You are an investment adviser. One of your clients approaches you for your advice on investing in equity shares of Alpha Company. You have collected the following data: Earnings per share last year $4.00 Payout ratio 0.40 Return on equity 0.25 Cost of equity capital 0.20 The company plans to increase the payout ratio to 50% after year 5. Required: i) Estimate the price of an equity share of this company using an appropriate dividend discount model and advise your client whether they should buy a share of the company. ii) Your client is keen to know whether there are any positive growth opportunities from their investment. Explain to your client the meaning of this concept using appropriate calculations. Note: Use two decimal places in your calculationsDividend on foreign held stocks, and migrant workers sending money back to their home country are reported on Question 13 options: the current account the capital account the financial account the reserve account
- What is arbitrage? Explain the arbitrage opportunity when the price of a dually listedmining company stock is $50 (USD) on the New York Stock Exchange and $60 (CAD) on the Toronto Stock Exchange. Assume that the exchange rate is such that 1 USD equals 1.21 CAD. Explain what is likely to happen to prices as traders take advantage of this opportunity.How do you determine the Cost of Equity? Ask your stockholders, or their representatives on the Board of Directors Take the risk-free rate and add the product of your equity beta and the market risk premium Multiply your cost of debt by 1 minus the tax rate Subtract your cost of debt from your WACCIn calculating earnings per share, a company uses the treasury stock method when a. it recognizes the assumed impact of exercising outstanding warrants. b. it develops a methodology to handle the premium paid on exercised share options. c. it needs to value the cash received for a convertible bond. d. it needs to value treasury stock repurchased during the year.