EBK CORPORATE FINANCE
EBK CORPORATE FINANCE
4th Edition
ISBN: 8220103164535
Author: DeMarzo
Publisher: PEARSON
Question
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Chapter 23, Problem 17P

a.

Summary Introduction

To determine: The average IPO underpricing.

Introduction: When a company sells its share publically in an open market for the first time, it is known as initial public offering (IPO).

b.

Summary Introduction

To determine: The expected one-day return on IPO portfolio.

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Answer the following questions on margin trading. a) Suppose that Intel is currently selling at $20 per share. You believe that the stock price of Intel will increase. So you buy 1,000 shares using $15,000 of your own money, borrowing the remainder ($5,000) of the purchase price from your broker. (i) What is the percentage increase in the net worth of your brokerage account if the price of Intel immediately changes to: (i) $24; (ii) $16? (ii) If the maintenance margin is 25%, how low can Intelľ's price fall before you get a margin call? (iii) How would your answer to part ii) change if you had financed the initial purchase with only $10,000 of your own money? b) Discuss margin buying of common stocks. Include in your discussion the advantages and disadvantages and investors' motivation of employing the margin buying strategy.
Please answer fast i give you upvote.
Please fast answer.   Your company is considering an issue of preference shares. The market is currently expecting a return of 7 percent and your company expects earnings per share to be $10.10 and the dividend for preferenceshares to be $1.40. i) What will be the issue price of a preference share? $20
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