Assume you are given the following information for firms A and B: A B D $1,563,400.00 $2,357,316.00 E $2,051,347.00 $1,257,431.00 Price $31.25 $31.25 i 13.52% 13.52% EBIT $97,347.00 $97,347.00 No taxes How do you replicate an investment in 79% of stock B by using stock A? What is the return of the replicating strategy?
Assume you are given the following information for firms A and B: A B D $1,563,400.00 $2,357,316.00 E $2,051,347.00 $1,257,431.00 Price $31.25 $31.25 i 13.52% 13.52% EBIT $97,347.00 $97,347.00 No taxes How do you replicate an investment in 79% of stock B by using stock A? What is the return of the replicating strategy?
Financial Accounting
15th Edition
ISBN:9781337272124
Author:Carl Warren, James M. Reeve, Jonathan Duchac
Publisher:Carl Warren, James M. Reeve, Jonathan Duchac
Chapter14: Long-term Liabilities: Bonds And Notes
Section: Chapter Questions
Problem 1PEA
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Assume you are given the following information for firms A and B:
| A | B | |
| D | $1,563,400.00 | $2,357,316.00 |
| E | $2,051,347.00 | $1,257,431.00 |
| Price | $31.25 | $31.25 |
| i | 13.52% | 13.52% |
| EBIT | $97,347.00 | $97,347.00 |
| No taxes |
How do you replicate an investment in 79% of stock B by using stock A? What is the return of the replicating strategy?
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