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Suppose that you sell short 500 shares of XTel, currently selling for $40 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) $44, (ii) $40, (iii) $36? 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.
You purchased land 3 years ago for $75,000 and believe its market value is now $120,000. What is the net present value of this project?
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Until the company has been incorporated it cannot contract or do any other act. Critically explain your reasoning in a clear and cogent fashion.
James Perkins wants to have a million dollars at retirement, which is 15 years away. He already has $200,000 in an IRA earning 8 percent annually. How much does he need to save each year, beginning at the end of this year to reach his target? Assume ..
Break-even EBIT (with and without taxes). Alpha company is looking at two different capital structures, one an all-equity firm and other a levered firm with $2.52 million of debt financing at 7% interest. The all-equity firm will have a value of $8.4..
The bonds make semiannual payments and have a par value of $1,000. If the YTM on these bonds is 5.6 percent, what is the current bond price?
Consider another uneven cash flow stream: What is the value of the entire cash flow stream at the end of Year 7 if all of the cash flows are invested in an account that pays 10% annually?
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