explain7. An investor owns 500 shares of stock in a firm with a debt/equity ratio = 1.0. The investorprefers an all-equity firm. If the stock price is $2 per share, what should the investor do?A. Sell 25 shares and lend $50.B. Sell 250 shares and lend $500.C. Borrow $500 and buy 250 new shares.D. Borrow $1,500 and buy 750 new shares.E. Borrow $2,500 and buy 1,250 new shares.

The investors owns share in equity = 500 shares * $2 = $1,000. Debt / equity = 1, it means that the…

Answered: 7. An investor owns 500 shares of stock…

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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You have gathered the following information for a company: The current price-to-earnings for the firm is The expected Earnings per share for the firm is The current price of the stock is Someone offers you $110 for the stock. What would you do? B Reject the offer as the expected future value is 15 $8.25 Accept the offer as there is a profit of $90.00 $123.75 Accept the offer as the expected future value is less than $110 Reject the offer as you have no idea where future prices will be. $20.00
The Turnip Company plans to issue preferred stock. Currently, the company’s stock sells for $110. Once new stock is issued, the Turnip Company would receive only $90. The dividend rate is 8%, and the par value of the stock is $100. Compute the cost of capital of the stock to your firm. Show all work.
Suppose you have two options for buying total 500 stocks. A: You can buy 1 stock from each of the 500 companies listed in S&P 500. B: You can buy 100 stocks from each of the top 5 companies (based on your judgement and study) listed in S&P 500. Based on empirical evidence you are most likely to gain more from which option?
Explain well with proper answer.
In the above example, suppose the firm had paid $80 per share when buying back shares with its $100 in cash. (Assume that the firm can buy back fractional shares.) In this and the following two questions, fill in the blanks in the table below. Cash Other assets Total market value of stock Shares Share price Do not use $ sign. Answer to nearest whole number. The missing value for a is: Before buyback $100 $400 $500 10 $50 After buyback 0 $400 a b C
Fernway Athletic Club plans to offer its members preferred stock with a par value of $100 and an annual dividend rate of 5%. What price should these members be willing to pay for the returns they want? a. Theo wants a return of 10%. b. Jonathan wants a return of 11%. c. Josh wants a return of 16%. d. Terry wants a return of 19%. a. If Theo wants a return of 10%, what price should he be willing to pay?
You have started a company and are in luck—a venture capitalist has offered to invest. You own 100% of the company with 4.56 million shares. The VC offers $1.03 million for 820,000 new shares. b. What is the post-money valuation? c. What fraction of the firm will you own after the investment?
G
Suppose Alex has an opportunity to buy shares of Sunnyland Snacks Company. The shares are expected to pay a dividend of $2.50 per share in one year and to sell for $92.00 per share at that time. a. Suppose the current interest rate on safe assets is 5% and Alex believes that investing in Sunnyland is not risky. How much would Alex be willing to pay today for each share of the company? b. Suppose the current interest rate on safe assets is 5%. Alex is willing to pay at most $85.90 for each share of Sunnyland today. Calculate Alex’s risk premium.
Verify and answer my question
Suppose Tyler initially pays $76,000 toward the purchase of $108,000 worth of stock, borrowing the remaining balance from one of notorious brokers, Diego. In this case, Tyler’s initial percentage margin is closest to A. 70.37%. B. 60.50%. C. 39.50%. D. 29.63%. Clear my choice
2. Suppose you buy shares of a stock worth OMR20000 and the initial margin is 50% and the maintenance margin is 30%. A. How much money must you pay the broker for the shares? How much have you borrowed from the broker? B. Suppose the price of the stock falls so that the shares are only worth OMR10000. What would be your nev account equity? C. How much money you need to give the broker to meet the maintenance margin?

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