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Assignment
Suppose Alpha Industries and Omega Technology have identical assets that generate identical cash flows. Alpha Industries is an all-equity firm, with 10 million shares outstanding trading for a price of $22 per share. Omega Technology has 20 million shares outstanding, as well as debt of $60 million.
a) According to MM Proposition 1, what should be the share price for Omega Technology?
b) Suppose shares of Omega Technology currently trade for $11 per share. What arbitrage opportunity is available? What assumptions are necessary to exploit this opportunity?
Samsung and Apple are two major producers of smart phones. Are these firms guaranteed to make high profits since they are the two largest firms in terms of market share in the industry? Explain.
Labor and other operating costs are es- timated to be $35,000 per year over the study pe- riod of 5 years. Salvage is estimated at 10% of first cost and i = 12% per year. Neglect the element of availability (a) to determine the breakeven quantity,..
the following questions address some of the price and output decisions faced by firms other than those found in
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Suppose that you value a hat from your favorite university at $20. The university bookstore has the hat on sale for $15. You purchase the hat but lose it on the way home. What should you do? Assume that losing the hat does not alter how you value it.
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Courts in Japan have recently begun to make awards to the families of workers who have been judged to have been "worked to death." That is, employers have been increasingly required by courts to make large financial payments
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