University Corporate Finance Homework: Solutions and Calculations

This document presents a comprehensive solution to a corporate finance assignment. It addresses several key concepts, including share repurchases, dividend payments, and their impact on Earnings Per Share (EPS). The assignment analyzes the valuation of a company, calculating the Weighted Average Cost of Capital (WACC) and the impact of investments. Furthermore, it explores futures contracts, evaluating potential profits and losses. Finally, the solution covers stock rights, determining the value of rights and the theoretical ex-right share value. This detailed analysis provides a complete overview of the financial concepts covered in the assignment, with step-by-step calculations and explanations, making it a valuable resource for students seeking to understand and solve similar problems. This assignment is contributed by a student and is published on Desklib, a platform providing AI-based study tools.

Running head: CORPORATE FINANCE
Corporate Finance
Name of the Student:
Name of the University:
Author’s Note:
Course ID:

1CORPORATE FINANCE
Table of Contents
Question 2:.......................................................................................................................................2
Answer to a:.....................................................................................................................................2
Answer to b:.....................................................................................................................................2
Question 3:.......................................................................................................................................3
Answer to a:.....................................................................................................................................3
Question 4:.......................................................................................................................................4
Answer to a:.....................................................................................................................................4
Answer to b:.....................................................................................................................................4
Answer to c:.....................................................................................................................................5
Question 5:.......................................................................................................................................5
Answer to a:.....................................................................................................................................5
Answer to b:.....................................................................................................................................6

2CORPORATE FINANCE
Question 2:
Answer to a:
Share repurchase Value
Number of share repurchase 115
Expenses $ 13,325.00
Share price $ 116.00
Shareholder's wealth $ 116.00
Dividend payment Value
outstanding shares 5,125
Expenses $ 13,325.00
Share price $ 116.00
Alternative share price $ 113.40
Dividend $ 2.60
Shareholder's wealth $ 116.00
Answer to b:
Share repurchase Value
Actual outstanding shares 5,010
Outstanding shares 5,125

3CORPORATE FINANCE
EPS $ 4.25
Number of share repurchase 115
New EPS $ 4.35
Share price $ 116.00
New EPS $ 4.35
P/E 26.68
Dividend payment Value
Alternative share price $ 113.40
EPS $ 4.25
P/E ratio 26.68
Question 3:
Answer to a:
Helena's Health Food
Actual Total market value 201,818
Ke 13%
Market value of equity 143,818
Kd 5.50%
Earnings before interest 20,000
Market value of debt 58,000

4CORPORATE FINANCE
Equilibrium value 181,818
WACC 5.32%
Investment 2,876.36
Expected increment in income 152.93
Total amount received 3,029.29
Question 4:
Answer to a:
Particulars Value
Close out position value 92.46
Contract number 5
90 day future contract 93.67
Face value 1,000,000
Actual investment 468,350,000
Close out position 462,300,000
Loss in future contract (6,050,000)
Answer to b:
Particulars Value
Contract number 2
Close out position value 96.02

5CORPORATE FINANCE
Face value 100,000
10-year bond futures 94.69
Actual investment 18,937,000
Close out position 19,204,000
Profit in transaction 267,000
Answer to c:
Particulars Value
SPI 200 futures 5,350.00
Contract number 5
Close out position value 5,480.00
Actual investment 26,750
Close out position 27,400
Profit in transaction 650
Question 5:
Answer to a:
Particulars Value
Share price 24.00
Issue 4.00