Mrs. Andreea Bob

640 WordsOct 16, 20123 Pages
Strategic Capital Management 1. The market capitalization is equal to the total value of the tradable shares of a publicly traded company; it is equal to the share price times the number of shares outstanding. Therefore, knowing that on December 9, 1988, the share of the Creative Computers was traded at $22.75 and UBID at $35.6875 and also that Creative Computers had 10.238.703 shares outstanding and UBID 9.146.883, their market capitalization was: Creative Computers: $22,75 * 10.238.703 = $232.930.493,25 UBID: $35,6875 * 9.146.883 = $326.429.387,0625 The “stub-value” of Creative Computers represents the difference between the value at which Creative Computers was trading on that day and the expected value, knowing that each…show more content…
3. Margin short = .5 * Value shares shorted UBID = $130.628.241 Margin long = .5 * Value shares bought CC = $116.465.246,625 Initial amount Elena has to put up: Margin short + Margin long = $247.093.487,625 (50% of both positions) *we took number of shares bought = 10.238.703 and shorted: 7.320.672,645 (0.715 * 10.238.703). 4. Return on the strategy: December 18: Value of strategy: (28,875-0,715*53,125)* 10.238.703 = $-93.268.185,140625 Return = (-93.268.185,140625+28.326.011)/ 247.093.487,625 = -26,28% December 21: Value of strategy: (35,375-0,715*84,125)* 10.238.703 = $-253.657.467,635625 Return = (-253.657.467,635625+28.326.011)/ 247.093.487,625 = -91,19% December 22: Value of strategy: (46,9219-0,715*134,50)* 10.238.703 = $-504.211.072,4568 Return = (-504.211.072,4568+28.326.011)/ 247.093.487,625 = -192,59% December 23: Value of strategy: (59,6875-0,715*188) * 10.238.703 = $-765.163.871,9475 Return = (-765.163.871,9475+28.326.011)/ 247.093.487,625 = -298,2% 5. The number p of shares bought is: 10.238.703, so the number of shares shorted is 0,715 * p = 7.320.672,645. Therefore, in the June 7, 1999: Value of strategy: 10.238.703 * (32,625 – 0,715* 34) = 85.134.815,445 Return = (85.134.815,445 + 28.326.011)/ 247.093.487,625 =

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