Fundamentals of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
9th Edition
ISBN: 9781259722615
Author: Richard A Brealey, Stewart C Myers, Alan J. Marcus Professor
Publisher: McGraw-Hill Education
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Chapter 14, Problem 7QP
a.
Summary Introduction
To compute: The changes in the accounts of company F.
b.
Summary Introduction
To compute: The changes in company in case of repurchase of 2 million shares.
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Suppose that you just short sold 100 shares of Quiet Minds stock for $86.00 per share.
Required:
a. If the initial margin requirement is 60%, how much equity must you invest?
.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.
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.
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Fundamentals of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
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- Need help with answers for B and C please The Evanec Company's next expected dividend, D1, is $3.50; its growth rate is 5%; and its common stock now sells for $38.00. New stock (external equity) can be sold to net $34.20 per share. A) What is Evanec's cost of retained earnings, rs? Do not round intermediate calculations. Round your answer to two decimal places.rs = % B) What is Evanec's percentage flotation cost, F? Round your answer to two decimal places.F = % C) What is Evanec's cost of new common stock, re? Do not round intermediate calculations. Round your answer to two decimal places. re = %arrow_forward3. (a): The stock price for Bank Muscat was OMR 100 per share one year ago. The stock is currently trading at OMR 92 per share. Shareholders just received OMR 20 as dividend. Calculate the "Return" was earned over the past year? (b): First find W, and then calculate the "Weighted average" cost of capital of a Company from the following table details: Capital Component Amount WCost Debt Preferred Stock Common Stock 40,000 5% 30,000 6% 50,000 4%arrow_forwardNeed answer the financial accounting questionarrow_forward
- The stock of Payout Inc. will go ex-dividend tomorrow. The dividend will be $1 per share. There are 20,000 shares of stock outstanding. The market value balance sheet for Payout is below: Assets Liabilities and equity Cash $100,000 Equity $1,000,000 Fixed Assets $900,000 a) What price is Payout selling for today? Explain your answer. b) What price will it sell for tomorrow? Explain your answer. Now suppose that Payout announces its intention to repurchase $20,000 worth of stock instead of paying out the dividend. c) What effect will the repurchase have on an investor who currently holds 10 shares and sells 2 of those shares back to the company in the repurchase? d) Compare the effects of the repurchase to the effects of the cash dividend that worked out in (a). Show all of your working. Do not use Excel.arrow_forwardNeed help to solve this questionarrow_forwardAnswer'sarrow_forward
- Question 1: Suppose you own 100 shares of General Motors stock, and the company earned $6 per share during the last reporting period. Suppose also that GM could either pay all of its earnings out as dividends (in which case you would receive $600) or retain the earnings in the business, buy more assets, and cause the price of the stock to increase by $6 per share (in which case the value of your stock would rise by $600). a. How would the tax laws influence what you, as a typical stockholder, would want the company to do? b. Would your choice be influenced by how much other income you had? Why might the desires of a 35-year-old doctor differ with respect to corporate dividend policy from the desires of a retiree living on a small income? c. How might the corporation’s decision with regard to the dividends it pays influence the price of its stock?arrow_forwardSuppose 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.)arrow_forwardam. 104.arrow_forward
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