In early $2012$, General Electric (GE) had a book value of equity of $\$ 109$ billion, $10.3$ billion shares outstanding, and a market price of $\$ 9.66$ per share. GE also had cash of $\$ 40$ billion, and total debt of $\$ 530$ billion. Three years later, in early $2015$, GE had a book value of equity of $\$ 112$ billion, $10.9$ billion shares outstanding with a market price of $\$ 16.59$ per share, cash of $\$ 85$ billion, and total debt of $\$ 417$ billion. Over this period, what was the change in GE's

a. market capitalization?

b. market-to-book ratio?

c. enterprise value?

Assume that a bond will make payments every six months as shown on the following timeline:

a. What is the maturity of the bond (in years)?

b. What is the coupon rate (in percent)?

c. What is the face value?

Suppose your employer offers you a choice between a $\$ 5700$ bonus and $120$ shares of the company stock. Whichever one you choose will be awarded today. The stock is currently trading for $\$ 58$ per share.

a. Suppose that if you receive the stock bonus, you are free to trade it. Which form of the bonus should you choose? What is its value?

b. Suppose that if you receive the stock bonus, you are required to hold it for at least one year. What can you say about the value of the stock bonus now? What will your decision depend on?

Consider the following potential events that might have taken place at Global Conglomerate on December $30$, $2015$. For each one, indicate which line items in Global's balance sheet would be affected and by how much. Also indicate the change to Global's book value of equity. (In all cases, ignore any tax consequences for simplicity.)

a. Global used $\$ 20$ million of its available cash to repay $\$ 20$ million of its long-term debt.

b. A warehouse fire destroyed $\$ 5$ million worth of uninsured inventory.

c. Global used $\$ 5$ million in cash and $\$ 5$ million in new long-term debt to purchase a $\$ 10$ million building.

d. A large customer owing $\$ 3$ million for products it already received declared bankruptcy, leaving no possibility that Global would ever receive payment.

e. Global's engineers discover a new manufacturing process that will cut the cost of its flagship product by over $50 \%$.

f. A key competitor announces a radical new pricing policy that will drastically undercut Global's prices.

Suppose the following orders are received by an exchange for Cisco stock:

• Limit Order: Buy $200$ shares at $\$ 25$

• Limit Order: Sell $200$ shares at $\$ 26$

• Limit Order: Sell $100$ shares at $\$ 25.50$

• Limit Order: Buy $100$ shares at $\$ 25.25$

a. What are the best bid and ask prices for Cisco stock?

b. What is the current bid-ask spread for Cisco stock?

c. Suppose a market order arrives to buy $200$ shares of Cisco. What average price will the buyer pay?

d. After the market order in ( c ) clears, what are the new best bid and ask prices, and what is the new bid-ask spread for Cisco?

Suppose that a company receives 60$\%$ of its orders over the Internet. Suppose that 30$\%$ of the orders received over the Internet are large orders, and 40$\%$ of the orders received by other means are large orders. Out of eight independently placed orders, what is the probability that two will be large orders received over the Internet, two will be small orders received over the Internet, two will be large orders not received over the Internet, and two will be small orders not received over the Internet?

Use the data from down below to determine the change, from $2012$ to $2015$, in GE's

a. book debt-equity ratio.

b. market debt-equity ratio.

In early $2012$ , General Electric (GE) had a book value of equity of $\$ 109$ billion, $10.3$ billion shares outstanding, and a market price of $\$ 9.66$ per share. GE also had cash of $\$ 40$ billion, and total debt of $\$ 530$ billion. Three years later, in early $2015$, GE had a book value of equity of $\$ 112$ billion, $10.9$ billion shares outstanding with a market price of $\$ 16.59$ per share, cash of $\$ 85$ billion, and total debt of $\$ 417$ billion.

Cellular Access, Inc. is a cellular telephone service provider that reported net income of $\$ 241$ million for the most recent fiscal year. The firm had depreciation expenses of $\$ 128$ million, capital expenditures of $\$ 159$ million, and no interest expenses. Working capital increased by $\$ 10$ million. Calculate the free cash flow for Cellular Access for the most recent fiscal year.

Your brother wants to borrow $\$ 10,750$ from you. He has offered to pay you back $\$ 12,750$ in a year. If the cost of capital of this investment opportunity is $12 \%$, what is its NPV? Should you undertake the investment opportunity? Calculate the IRR and use it to determine the maximum deviation allowable in the cost of capital estimate to leave the decision unchanged.

What are the advantages and disadvantages of organizing a business as a corporation?

Consider a project that requires an initial investment of $\$ 102,000$ and will produce a single cash flow of $\$ 153,000$ in five years.

a. What is the NPV of this project if the five-year interest rate is $4.9 \%$ (EAR)?

b. What is the NPV of this project if the five-year interest rate is $9.8 \%$ (EAR)?

c. What is the highest five-year interest rate such that this project is still profitable?

Who reads financial statements? List at least three different categories of people. For each category, provide an example of the type of information they might be interested in and discuss why.

What four financial statements can be found in a firm's $10-\mathrm{K}$ filing? What checks are there on the accuracy of these statements?

What are the main advantages and disadvantages of organizing a firm as a corporation?