There is a new IPO of firm whose value might be 50 or 100 with equal probability. A lot of investors know the value of the firm because they had access to the accounts but you do not. What would be your maximum bid in an auction IPO? a. 75 b. 0 c. 50 d. 100
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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?You want to purchase IBM stock at $130 from your broker using as little of your own money as possible. If initial margin is 50% and you have $19, 600to invest, how many shares can you buy?Suppose we are interested in bidding on a piece of land and we know one other bidder is interested.1 The seller announced that the highest bid in excess of 10,000 will be accepted. Assume that the competitors bid x is a random variable that is uniformly distributed between 10,000 and 15,000. a. Suppose you bid 12,000. What is the probability that your bid will be accepted? b. Suppose you bid 14,000. What is the probability that your bid will be accepted? c. What amount should you bid to maximize the probability that you get the property? d. Suppose you know someone who is willing to pay you 16,000 for the property. Would you consider bidding less than the amount in part (c)? Why or why not?
- A friend of yours owns a company that is about to get a large government contract. He tells you this inside information about the contract and also mentions that it should make the company's stock price increase dramatically. If you invest based on this inside information, then you are implicitly saying that stock markets are inefficient in which context? Question 5 options: weak form efficient market theory semi-strong form efficient market theory strong form efficient market theorywhich of the following statement(s) is/are correct?( Please help me with explanations also) A) Some IPOs are cash offers and others are right issues b) Green show option gives the issuer to sell 10% more shares to the underwriter at the offering price C)crown related firms are perhaps the largest source of all venture capital D) all the options E) none the options2. During the discussion of the potential IPO and East Coast Yachts’ future, Dan states that hefeels the company should raise $60 million. However, Larissa points out that if the company needsmore cash soon, a secondary offering close to the IPO would be potentially problematic. Instead,she suggests that the company should raise $90 million in the IPO. How can we calculate theoptimal size of the IPO? What are the advantages and disadvantages of increasing the size of theIPO to $90 million?
- 1)What would be the unlevered beta of Simon So CFO's suggestion? 2) What would be new beta levered of Simon So CFO's suggestion? 3) What would be Simon's estimated cost of equity (using CAPM) if it changed its capital structure to 60 percent debt and 40 percent equity? 4) What would be the new WACC of Simon Software based on the new capital structure? Would you support the change in the capital stru~ture?Every morning, Bob Smith puts his stock pick of the week up on Yahoo! Finance for the world to see. Every week, Ben Graham seets it, waits a few hours and then buys the stock and it always goes up! This would appear to violate the: a) Weighted Average Cost of Capital b) Volitality Principal c) Capital Asset Pricing Model d) Efficient Market HypothesisDo solve all three parts Suppose that your company wants to raise additional money via a right offering. Currently, the value of the company is $10,000,000 and the price per share is $100. The company wants to raise $1,000,000. (a) Suppose that your company wants to avoid a large drop in price after the rights offering. In particular, it wants the ex-rights price to be $95. What should be the subscription price? How many additional shares should the company issue? (b) Compute the value of the right. How many rights are required to buy one share? (c) Suppose now that the firm decides to hire an investment bank as an underwriter to facilitate the process. Suppose that the underwriter charges a 2% fee for each dollar raised in the rights offering. Redo part (a), assuming that the ex-rights price is still $95. How does your answer change if, on top of the 2% fee, the underwriter requires a fixed payment of $10,000?
- 1.What type of trading order are you likely to give your broker in each of the three circumstances below? a. You want to buy shares of company ABC to diversify your portfolio. You believe the share price is good and you want the trade done very quickly and cheaply. b. You want to buy shares of ABC into your portfolio of investment, but your analysis shows that the current stock price is too high given the firms prospects. You would like to purchase the shares at a price about 10% lower than the current market price. c. You are planning to purchase a brand-new car sometime in the next month or two and will sell your shares of ABC to provide the funds for your own down payment. You believe that the share price of ABC will rise in the coming few weeks. However, if you are wrong and the share price should drop suddenly you will not be able to afford to purchase the car. Therefore, you want to hold on to the shares for as long as possible, but still protect yourself against the risk of a…You are bearish on Telecom and decide to sell short 100 shares at the current market price of $47 per share. Required: a. How much in cash or securities must you put into your brokerage account if the broker’s initial margin requirement is 50% of the value of the short position? b. How high can the price of the stock go before you get a margin call if the maintenance margin is 30% of the value of the short position?Bank of London is selling 2 million shares in an IPO. The target price is €25 per share. The investment bank is asking for a spread of 7%. We would prefer the spread to be lower, but fear that the investment bank will then want a lower offer price to reduce their risk. How much money will the firm receive if the offer price is €25 per share and the spread is 7%. If you insist on a lower spread and are willing to accept a price as low as €24 per share, then how high can the spread be before you would have preferred a 7% spread and €25 per share price?
