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Share repurchase proposal: Currently, the firm has available capital (cash and net income) of approximately $5,000,000. There is a large block of stock available at $25 a share. The initial outstanding shares for the company are 15,000,000.
If the firm decides to spend this amount of excess cash on a share repurchase program, how many shares of stock will be outstanding after the stock repurchase is completed?
What are the benefits of repurchasing shares? How will this affect the capital structure of the company? How can this be interpreted in the marketplace?
Would a dividend be better? Please discuss the pros and cons of dividends and share buybacks. Make a recommendation to management.
Concept Check: There are tax ramifications which tend to get very complex; for the sake of this exercise let us disregard tax implications and effects.
Helpful Hint: Think about the impact on the ratios that companies usually are measured by in the marketplace. Look at these policies through the eyes of current and potential investors as well as management of ACME.
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Graph the production opportunity set in a Co, C1 framework. -If the market rate of return is 10%, draw in the capital market line for the optimal investment decision.
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Recently, you sold 1,000 shares of stock for $21,400. The sale was a short sale with an initial margin requirement of 60 percent. The maintenance margin is 30 percent. The stock is currently trading at $27.50 a share. What is your current margin posi..
Determine the original basis. Then calculate the profit from a hedge if it is held to expiration and the basis converges to zero. Show how the profit is explained by movements in the basis alone.
Becker Financial recently declared a 2-for-1 stock split. Prior to the split, the stock sold for $80 per share. If the firm's total market value is unchanged by the split, what will the stock price be following the split?
An investment offers 10,000 per year, with the first cash flow to be received today. If the relevant interest rate is 8% per year, what is the pv of the investment ( at year 0) ? should the answer be 135000? You can make 450 monthly payments for 5 yr..
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