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Suppose that Facebook is selling at $75 per share. You are bullish on Facebook stock, and want to buy 1000 shares on margin. The initial margin is 50%. You can borrow from your broker at an interest rate of 6%.
(a) How much do you invest using your own money? How much do you need to borrow from your broker?
(b) Assume that Facebook pays a year-end dividend of $2.5 per share. What will be your holding period return if the stock ex-dividend price of Facebook (i) goes up by 10% (ii) doesn’t change (iii) goes down by 10% during the next year?
(c) How low can stock price fall before you get a margin call, if the maintenance margin is 25%?
You are bearish on Facebook stock, and want to sell short 1000 shares at current price. The initial margin is 50%. (a) Assume that you earn no interest on the funds in your margin account. Facebook currently does not pay dividend. What will be your holding period return if the stock price of Facebook (i) goes up by 10% (ii) doesn’t change (iii) goes down by 10% during the next year?
(b) How high can stock price rise before you get a margin call, if the maintenance margin is 25%?
Calculate the budgeted sales for the 4 years and company has taken a loan for financing the new machine for apple juice production, this has been added to long term debt.
Short term debt tends to be more expensive than long term debt. Low levels of inventory lead to higher profit margins. Maturity matching is generally considered to be an aggressive financing policy.
What was the hospital's original profit forecast (assume away any issues with depreciation, taxes, etc.)? Halfway through the fiscal year, what is the hospital's revised projection for FY11 profits?
foreign bonds are bonds sold by a foreign borrower but denominated in the currency of the country in which the issue is
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The Modigliani-Miller Proposition I without taxes states:
AMP, Inc., has invested $2,165,800 on equipment. The firm uses payback period criteria of not accepting any project that takes more than four years to recover costs. The company anticipates cash flows of $433,386, $512,178, $562,255, $764,997, $816,5..
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Great Seneca Inc. sells $100 million worth of 29-year to maturity 10.59% annual coupon bonds. The net proceeds (proceeds after flotation costs) are $980 for each $1,000 bond. The firm's marginal tax rate is 30%. What is the after-tax cost of capital ..
Bob makes his first $400 deposit into an IRA earning 8.1% compounded annually on his 24th birthday and his last $400 deposit on his 43rd birthday (20 equal deposits in all). With no additional deposits, the money in the IRA continues to earn 8.1% int..
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