Problem 2-18 Functions of Financial Markets (L03) Consider the table shown below to answer the question posed in part a. Parts b and c are independent of the given table. Callaway Golf (ELY) Alaska Air Group (ALK) Yum! Brands (YUM) Caterpillar Tractor (CAT) Microsoft (MSFT) Number of Share (millions) 94.2 . 123.7 301.7 * 543.3 7,560 Stock Price 27.30 50.70 103.07 186.66 242.12 Market Capitalization (5 millions) $2,572 $ 6,272 $ 31,096 $ 101,412 $1,830,427 a. The price of Yum! Brands stock has risen to $160. What is the market value of the firm's equity if the number of outstanding shares does not change? Note: Enter your answer in dollars not in billions of dollars. b. The rating agency has revised Catalytic Concepts' bond rating to AAA (use Table 2.2). What interest rate, approximately, would the company now need to pay on its bonds? Note: Enter your answer as a percent rounded to 1 decimal place. c. A farmer and a meatpacker use the commodity markets to reduce their risk. One agrees to buy live cattle in the future at a fixed price, and the other agrees to sell. Which one sells?

Problem 2-18 Functions of Financial Markets (L03) Consider the table shown below to answer the question posed in part a. Parts b and c are independent of the given table. Callaway Golf (ELY) Alaska Air Group (ALK) Yum! Brands (YUM) Caterpillar Tractor (CAT) Microsoft (MSFT) Number of Share (millions) 94.2 . 123.7 301.7 * 543.3 7,560 Stock Price 27.30 50.70 103.07 186.66 242.12 Market Capitalization (5 millions) $2,572 $ 6,272 $ 31,096 $ 101,412 $1,830,427 a. The price of Yum! Brands stock has risen to $160. What is the market value of the firm's equity if the number of outstanding shares does not change? Note: Enter your answer in dollars not in billions of dollars. b. The rating agency has revised Catalytic Concepts' bond rating to AAA (use Table 2.2). What interest rate, approximately, would the company now need to pay on its bonds? Note: Enter your answer as a percent rounded to 1 decimal place. c. A farmer and a meatpacker use the commodity markets to reduce their risk. One agrees to buy live cattle in the future at a fixed price, and the other agrees to sell. Which one sells?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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