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GeKay stock is worth $100, or $80, or $60. Investors believe that each case is equally likely so that the current share price is the average, namely $80. Suppose Mr. Satanak, the company CEO, announces that he will sell most of his holdings of the stock to diversify (and investors believe his motivation). Diversifying is known to be worth 10% of the share price ---that is, the CEO would be willing to receive up to 10% less than the shares are worth to achieve the benefits of diversification. a.If investors believe that Mr. Satanak knows the true value of the stock, how will the share price change (be precise here)if he tries to sell? (Assume that any attempt to sell is immediately observable by investors).b. If he actually goes ahead and sells (for the above reason 16a.), what must be the true share price? Explain briefly but clearly and concisely using complete sentences.
Hydra Multinational is a vast conglomerate firm involved in a wide array of business ventures ranging from satellite radio to cat food. One of its many divisions, a restaurant cha
An investor buys a French government, 10-year bond, paying annual coupon of 4.5%. Face value = 1000. The investor is unsure of his investment horizon and considers 5 horizons: 5, 6
Have mergers affected competition? A: Federal Reserve data show that measured on the local level, where competition takes place, markets have actually experienced more bank
Q: Are there safety and soundness implications of mergers? A: No. All mergers require regulatory approval and are subject to intense examination by regulators. If anything, the
On December 31, 2009, the Real Weapons Factory reported total stockholders' equity of $447,200. On that date, total contributed capital was $360,000. During 2009, the firm had tota
Explain with proof that c >= max(S - X, 0), where c is the value of the European call option, S is the price of the underlying asset and X is the strike of the option. The follo
how can i rank a project when there are conflict between IRR & NPV
The Directors of Rohan Plc are discussing the importance of the dividend policy on the market value of their firm. The Chairman considers that the dividend is important and does
a) Calculate the price of a European style call option with 6 months left to maturity assuming a risk-free rate of 3.5% and a non-dividend paying stock which can change in price
From Finance.yahoo.com Part 1: Show the P/E ratio for each company (as reported in finance.yahoo.com). Answer the question: Which of these two firms seems to be more of a "growth
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