Loose Leaf for Foundations of Financial Management Format: Loose-leaf
17th Edition
ISBN: 9781260464924
Author: BLOCK
Publisher: Mcgraw Hill Publishers
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Chapter 20, Problem 11P
a.
Summary Introduction
To calculate: The coefficient of variation, both pre and post-merger, for Knight Corporation.
Introduction:
Coefficient of variation ( CoV ):
It is the ratio of SD (standard deviation) to the mean that shows the extent of the variability of the data in relation to the population's mean.
b.
Summary Introduction
To explain: The possible impacts on Knight Corporation’s post-merger P/E ratio assuming that there are risk-averse investors.
Introduction:
P/E Ratio:
A ratio which is computed by dividing a company’s current share price by its EPS is termed as P/E ratio. It helps in valuing a company’s profitability in the present times as well as in the future.
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Travellers Inn (Millions of Dollars)
Cash
$ 10
Accounts payable
$ 10
Accounts
20
Accruals
15
receivable
Inventories
20
Short-term debt
Current assets
$ 50
Current liabilities
$ 25
Net fixed assets
50
Long-term debt
30
Preferred stock (50,000 shares)
Common equity
Common stock (3,800,000 shares)
$ 10
Retained earnings
30
Total common equity
$ 40
Total assetS
$100
Total liabilities and equity
$100
The following facts also apply to TII:
1. The long-term debt consists of 29,412 bonds, each having a 20-year maturity, semiannual payments, a coupon rate of 7.8%, and a face
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11.8% yield to maturity.
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Chapter 20 Solutions
Loose Leaf for Foundations of Financial Management Format: Loose-leaf
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