Question
In: Accounting
9.5 You own 100 shares in a company called Invest Co. Inc. You have determined from the...
9.5 You own 100 shares in a company called Invest Co. Inc. You have determined from the balance sheet that the firm has equipment worth $900,000, $100,000 cash, and 100,000 shares outstanding.
For each situation (a–f) below, calculate the price/value of each share in the firm, and explain how your wealth is affected. Ignore tax effects. (12 marks: 2 marks each)
- The firm pays out a dividend of $1 per share.
- The firm buys back 10,000 shares for $10 cash each, and you choose to sell your shares back to the company.
- The firm buys back 10,000 shares for $10 cash each, and you choose not to sell your shares back to the company.
- The firm declares a 2-for-1 stock split.
- The firm declares a 10% stock dividend.
- The firm buys new equipment for $100,000, which will be used to earn a return equal to the firm’s discount rate.
Solutions
ekkarill92 answered 1 year agoRelated Solutions
You have $20,000 to invest in Company shares that currently trade at $41.40. You choose to...
You have $20,000 to invest in Company shares that currently
trade at $41.40. You choose to invest 30% of your funds in
long-term call options with a strike of $45 that are currently
quoted at $0.65. The options expire in 11 months. The other funds
will be placed in a money market earning 6.5% compounded monthly.
What is the rate of return for the holding period on the total
investment position if the share price is up 24% at expiry?
Suppose you own 100 shares of stock and the company is voting to replace 2 members...
Suppose you own 100 shares of stock and the company is voting to
replace 2 members of the Board of Directors. You cast 200 votes for
one candidate to replace a current board member. You can do this
only if the corporation deploys:
Select one:
a. Traditional voting
b. Cumulative voting
c. Articles of incorporation
d. Preemptive rights
You own 100 shares of stock of unlevered Gamma Company which has 1000 shares outstanding. Gamma...
You own 100 shares of stock of unlevered Gamma Company which has
1000 shares outstanding. Gamma plans to pay $2,200 dividend at the
end of the current year (i.e. one year from today) and a
liquidating dividend of $4,840 at the end of 2 years from today.
The required return on Gamma’s stock is 10 percent. Ignoring taxes,
and transaction costs.
a. What is the value of your shares of
stock? Show calculations to support your answer.
b. Suppose shareholders...
You own 100 shares of stock of unlevered Gamma Company which has 1000 shares outstanding. Gamma...
You own 100 shares of stock of unlevered Gamma Company which has
1000 shares outstanding. Gamma plans to pay $2,200 dividend at the
end of the current year (i.e. one year from today) and a
liquidating dividend of $4,840 at the end of 2 years from today.
The required return on Gamma’s stock is 10 percent. Ignoring taxes,
and transaction costs.
a. What is the value of your shares of
stock? Show calculations to support your answer.
b. Suppose shareholders...
You own 100 shares of stock of unlevered Gamma Company which has 1000 shares outstanding. Gamma...
You own 100 shares of stock of unlevered Gamma Company which has
1000 shares outstanding. Gamma plans to pay $2,200 dividend at the
end of the current year (i.e. one year from today) and a
liquidating dividend of $4,840 at the end of 2 years from today.
The required return on Gamma’s stock is 10 percent. Ignoring taxes,
and transaction costs.
a. What is the value of your shares of stock? Show calculations
to support your answer.
b. Suppose shareholders...
You have $100 to invest in the stock market. Choose a company that would be considered...
You have $100 to invest in the stock market. Choose a company
that would be considered an inelastic company -- it should meet 3
of the 4 requirements to be inelastic. Explain: 1) What stock(s)
you chose and how much (so for example, what is the stock price and
how did you break up the $100 (for example I chose stock x, which
is currently trading at $32.00 a share and I would buy 3 shares) 2)
Why that stock...
What is a right? How are rights created? Suppose you own 100 shares of ABC Company,...
What is a right? How are rights created? Suppose you own 100
shares of ABC Company, which has just announced a rights offering.
You will be able to purchase one share of common stock at $20 a
share plus four rights. The current market price of the stock is
$25 a share.
What will each right be worth after the rights are issued and
begin trading? Is it to your advantage to: a) sell the rights, b)
use the rights...
41) If you have 100 shares of Google Inc. The stock is traded at $1,200. We...
41) If you have 100 shares of Google Inc. The stock is traded at
$1,200. We assume that the firm will announce 10:1 stock split.
What’s the total number of shares you will have after the stock
split?
answer is
1,000 shares
42) Based on the information in Question 41, what will be the
total value of your holdings of Google stock after the stock
split?
a) $120,000
b) $1,200,000
c) $12,000
d) $1,200
45) A company purchased $25,000 worth...
Suppose you invest in 100 shares of Harley-Davidson (HOG) at $40 per share and 200 shares...
Suppose you invest in 100 shares of Harley-Davidson (HOG) at $40
per share and 200 shares of Yahoo (YHOO) at $25 per share. If the
price of HOG increases to $50 and the price of YHOO decreases to
$12 per share, what is the return on your portfolio? (Assume no
dividends on either stock).
You own 100 shares in the firm Alfa. The current share price is £10 and the...
You own 100 shares in the firm Alfa. The current share price is
£10 and the earnings per share is £0.70. Assume there are no
capital market imperfections and that Alfa’s annual earnings will
remain constant in future. Alfa pays out all of its earnings each
year as dividends. You prefer to invest your money in the firm, so
you reinvest each year’s dividend in the firm by buying more of its
shares. Your investment horizon is 10 years.
i....
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- Determine the area of a flat piece of metal according to the data in the table...
- ANSWER WITH ML CODE PLZ. NOT C++ 1) fun main() = let val yy = [6,4,2,0];...
- Which medium is the most influential in the formation of American public opinion? How long has...
- Part 1 (30 marks) IT Software Project As a senior analyst for the company you have...
- Topic = Strategy defination (100 words ) explain (150 words ) and give two examples (...
- Programming Language: C# CheckingAccount class You will implement the CheckingAccount Class in Visual Studio. This is...
- C++ Data Structures 4. Write a client function that merges two instances of the Sorted List...
ADVERTISEMENT