Business, 05.07.2020 14:01 Joeyoman

Suppose that all investors have the disposition effect. A new stock has just been issued at a price of $70, so all investors in this stock purchased the stock today. A year from now the stock will be taken over, for a price of $84 or $56 depending on the news that comes out over the year. The stock will pay no dividends. Investors will sell the stock whenever the price goes up by more than 10%. A. Suppose good news comes out in 6 months (implying the takeover offer will be $67). What equilibrium price will the stock trade for after the news comes out, that is, the price that equates supply and demand? B. Assume that you are the only investor that does not suffer from the disposition effect and your trades are small enough to not affect prices. Without knowing what will actually transpire, what trading strategy would you instruct your broker to follow?You work for Microsoft Corporation (ticker: MSFT), and you are considering whether to develop a new software product. The risk of the investment is the same as the risk of the company. A. Using the data in Table 1 shown here, and Table 2 shown here calculate the cost of capital using the FFC factor specification if the current risk-free rate is 2.6% per year. B. Microsoft's CAPM beta over the same period was 0.96. What cost of capital would you estimate using CAPM? The cost of capital using the CAPM is%. Table 1: Estimated Factor Betas, 2005-2015 Fctor MSFT XOM GE MKT 1.06 0.78 1.29SMB 0.45 0.62 0.39HML 0.09 0.21 0.82PR1YR 0.07 0.32 0.22 Table 2: FFC Portfolio Average Monthly Returns, 1927-2015 Factor Portfolio Average Monthly Return(%) 95% Confidence Band(%)MKT- rf 0.66 + 0.33SMB 0.23 + 0.19HML 0.39 + 0.21PR1YR 0.67 + 0.29

Answers: 3

Show answers

Other questions on the subject: Business

Business, 21.06.2019 21:00, yasmineeee96371

Jurvin enterprises is a manufacturing company that had no beginning inventories. a subset of the transactions that it recorded during a recent month is shown below. $76,700 in raw materials were purchased for cash. $71,400 in raw materials were used in production. of this amount, $66,300 was for direct materials and the remainder was for indirect materials. total labor wages of $151,700 were incurred and paid. of this amount, $134,300 was for direct labor and the remainder was for indirect labor. additional manufacturing overhead costs of $126,300 were incurred and paid. manufacturing overhead of $126,800 was applied to production using the company's predetermined overhead rate. all of the jobs in process at the end of the month were completed. all of the completed jobs were shipped to customers. any underapplied or overapplied overhead for the period was closed to cost of goods sold. required: 1. post the above transactions to t-accounts.2. determine the cost of goods sold for the period.

Answers: 1

continue

Business, 22.06.2019 05:50, marjae188jackson

Acompany that makes shopping carts for supermarkets and other stores recently purchased some new equipment that reduces the labor content of the jobs needed to produce the shopping carts. prior to buying the new equipment, the company used 6 workers, who produced an average of 79 carts per hour. workers receive $16 per hour, and machine coast was $49 per hour. with the new equipment, it was possible to transfer one of the workers to another department, and equipment cost increased by $11 per hour while output increased by four carts per hour. a) compute the multifactor productivity (mfp) (labor plus equipment) under the prior to buying the new equipment. the mfp (carts/$) = (round to 4 decimal places). b) compute the productivity changes between the prior to and after buying the new equipment. the productivity growth = % (round to 2 decimal places)

Answers: 3

continue

Business, 22.06.2019 09:40, MileenaKitana

Wilson center is a private not-for-profit voluntary health and welfare entity. during 2017, it received unrestricted pledges of $638,000, 65 percent of which were payable in 2017, with the remainder payable in 2018 (for use in 2018). officials estimate that 14 percent of all pledges will be uncollectible. a. how much should wilson center report as contribution revenue for 2017? b. in addition, a local social worker, earning $20 per hour working for the state government, contributed 600 hours of time to wilson center at no charge. without these donated services, the organization would have hired an additional staff person. how should wilson center record the contributed service?

Answers: 2

continue

Business, 22.06.2019 11:40, sabrinabowers4308

Vendors provide restaurants with what? o a. cooked items ob. raw materials oc. furniture od. menu recipes

Answers: 1

continue

You know the right answer?

Suppose that all investors have the disposition effect. A new stock has just been issued at a price...