Suppose you own 100 shares of IBM stock which you intend to sell today. Since you will sell it in the secondary market, IBM will receive no direct cash flows as a consequence of your sale. Why, then, should IBM’s management care about the price you get for your shares?
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- Suppose you own 100 shares of IBM stock which you intend to sell today. Since you will sell it in the secondary market, IBM will receive no direct cash flows as a consequence of your sale. Why, then, should IBM’s management care about the price you get for your shares?
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- Suppose you own stock in a company. The current price per share is P25.00. Another company has just announced that it wants to buy your company and will pay P35.00 per share to acquire all the outstanding stock. Your company’s management immediately begins fighting off this hostile bid. Is management acting in the shareholders’ best interests? Why or why not?Suppose you decide that the Bear Company stock is selling at too high a price at its current $50 per share price. You are convinced that the price of Bear stock will fall in the next couple of months, so you decide to sell 100 shares of Bear stock short. Ignoring transactions costs, if the Bear Company does not pay dividends, what is your profit or loss if the stock’s price goes to: $40 and you buy at that price to cover your short?What is the value of Ls stock for volatilities between 0.20 and 0.95? What incentives might the manager of L have if she understands this relationship? What might debtholders do in response?
- Do not give image formatWhich of the following is a primary market transaction? a. You sell 200 shares of IBM stock on the NYSE through your broker. b. IBM issues 2,000,000 shares of new stock and sells them to the public through an investment banker. c. You buy 200 shares of IBM stock from your brother. The trade is not made through a broker--you just give him cash and he gives you the stock. d. One financial institution buys 200,000 shares of IBM stock from another institution. An investment banker arranges the transaction. e. You invest $10,000 in a mutual fund, which then uses the money to buy $10,000 of IBM shares on the NYSE.Please help answer this question.
- . On the day an IPO comes out, the market pricecan rise above the offering price or fall below thatprice. Is it more common for the market price toclose above or below the offering price on the dayof an IPO? If a company’s market price rises abovethe IPO price, does that suggest that the companyleft money on the table and thus received less for its shares than it should have received? If mostcompanies do leave money on the table, does thatindicate the IPO market is inefficient? How mightsystematic underpricing be explained? Has theamount of underpricing been constant over time?Explain.1. What do you think the consequences might be in financial markets if individuals consumed more of their incomes and thereby reduced the supply of funds available to financial institutions? 2. Stem Corporation received confirmation that all its PSE listing requirements were in order, and that it may proceed to issue its stock. The company plans to raise P500 million on the stock issue. On what market do you expect this stock to be traded? Would this transaction take place on the money market or the capital market? 3. Over the past 100 years, the level of government regulation of financial institutions and markets has ebbed and flowed or, as some economists might argue, has ebbed and flooded. Although the laws and regulatory agencies created by the government have various defined and not-so-well defined goals, what might you argue is the single biggest benefit of government regulation?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
- АВС XYZ Discount rate (r) Historical growth rate of 0.015+2*0.085=0.185 0.015+1.5*0.085=0.142 (58/30)^(1/30)-1=0.022 Not available. Cannot dividends compute without dividends Sustainable growth rate Fundamental value using dividend growth model with the historical growth rate Fundamental value using the 467*(1+0.185)/(0.185-0.045) dividend growth model with =3953 the sustainable growth rate Fundamental value using residual income growth 0.15*(1-0.7)=0.045 467*(1+0.185)/(0.185-0.022) 0.2*(1-0)=0.2 Not available. Cannot =3395 compute without dividends Not available. Cannot compute without dividends 80*(1+0.022)-(550*0.022)/(0. 185-0.022)=427.36 Not available. Cannot compute without dividends model with the historical growth rate Fundamental value using the 80*(1+0.045)-(550*0.045)/(0. residual income growth 12*(1+0.2)-(100*0.2)/(0.142- 0.2)=96.5 185-0.045)=420.35 model with the sustainable growth rateIn a few sentences, answer the following question as completely as you can. You are discussing stock valuation techniques with your broker. You mention that your Finance professor stated that “a stock that will never pay a dividend is valueless.” Your broker says this is not true because you can always sell the stock to someone else (thus, a capital gain is possible) a share of stock represents a share of ownership in something tangible (i.e., the issuing firm).Argue for or against your broker’s position.Is it better for a firm’s actual stock price in the market to be under, over, or equal to its intrinsicvalue? Would your answer be the same from the standpoints of stockholders in generaland a CEO who is about to exercise a million dollars in options and then retire? Explain.
