1. There is a tender offer to repurchase 1,000,000 shares at $50. 5 shareholders (group A) each say they are willing to sell 200,000 and 5 shareholders (group B) say they are each willing to sell 500,000 shares at $50. How many shares will each shareholder in group A get to sell? Group B?
2. Rews Co. is starting a new capital budeting project. They purchased a plot of land for $3.6million 6 years ago, which will currently sell for $4.1million if sold. The company wants to build a new plant on the land, which the building would cost $18.1million. The land would need to be prepped for $950,000 before construction of the building. What is the CAPEX in year 0 for this project?
3. You buy PP&E today for $1 million. You depreciate this asset straight line for 10 years. However, in year 8 you sell the asset for $4million. What is the Salvage Value net of tax (SVNOT) is the tax rate is 21%?
4. HRT Inc. has CFs of -$15,400 $7,300 $9,100 and $5,900 is years 0-3, what is the IRR of this project? NPV if r is 10%?
5. Jimbo Co. has 2,000,000 shares outstanding and 200,000 bonds outstanding. Jimbo has a beta of 1.2 and a recently paid dividend. The dividend is expected to grow at 3%, forever. The risk-free rate of return is 3% and the market risk premium is 6%. The current price per share is $85. The bonds have a face value of $1,000 and a current price of $1,100. There are 10 years left to maturity and the coupon rate is 6%, paid annually. The tax rate is 21%. What is the overall required rate of return of Jimbo Co.?
6. As a financial manager, when you are choosing the optimal capital structure, what are your major considerations when considering how much debt there should be in the capital structure?