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 about for these? (b) Suppose you have purchased some GameStop shares on margin at $5per share. You ask your broker to put in a limit sell order at $7, anda stop loss order at $4.50.i. What will happen if the stock price falls to $4.50?ii. What will happen if the stock price rises to $7?iii. Now suppose you had instead short-sold your GameStop shares(as in the first part of the question). What instructions mightyou give to your broker to minimise your losses and lock in yourgains?
- 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?Please help answer this question.Suppose that you sell short 1,000 shares of Xtel, currently selling for $20 per share, and give your broker $15,000 to establish your margin account.a. If you earn no interest on the funds in your margin account, what will be your rate of return after one year if Xtel stock is selling at: (i) $22; (ii) $20; (iii) $18? Assume that Xtel pays no dividends.b. If the maintenance margin is 25%, how high can Xtel’s price rise before you get a margin call?c. Redo parts (a) and (b), but now assume that Xtel also has paid a year-end dividend of $1 per share. The prices in part (a) should be interpreted as ex-dividend, that is, prices after the dividend has been paid.
- .Suppose that you sell short 1,000 shares of Xtel, currently selling for $20 per share, and give your broker $15,000 to establish your margin account. a.If you earn no interest on the funds in your margin account, what will be your rate of return after one year if Xtel stock is selling at: (i) $22; (ii) $20; (iii) $18? Assume that Xtel pays no dividends. b.If the maintenance margin is 25%, how high can Xtel’s price rise before you get a margin call? c.Redo parts (a) and (b), but now assume that Xtel also has paid a year-end dividend of $1 per share. The prices in part (a) should be interpreted as ex-dividend, that is, prices after the dividend has been paid.13.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. $20.00In 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.
- Please Details solution and Do not give image formatRaghubhaiSuppose that you sell short 1000 shares of Xtel, currently selling for $50 per share, and give your broker $40,000 to establish your margin account. a. If you earn no interest on the funds in your margin account, what will be your rate of return after one year if Xtel stock is selling at: (i) $55; (ii) $50; (iii) $46? Assume that Xtel pays no dividends. (Leave no cells blank - be certain to enter "0" wherever required. Negative values should be indicated by a minus sign. Round your answers to 2 decimal places.) b. If the maintenance margin is 25%, how high can Xtel’s price rise before you get a margin call? (Round your answer to 2 decimal places.) c. Redo parts (a) and (b), but now assume that Xtel also has paid a year-end dividend of $2 per share. The prices in part (a) should be interpreted as ex-dividend, that is, prices after the dividend has been paid. (Negative values should be indicated by a minus sign. Round your answers to 2 decimal places.)
