a.
250
$500
=
$0.50
Capital market price of share = $15 -$0.50 = $14.50
b.
$15
c.
The outcomes are the same.
a.
Tax rate
50% - $25%
=
33%
1 - 25%
P_ex = 30 - 6(1-t*)
=
b.
$6 X 50% = $3 for dividend
Tax savings$30 - $26 = $4 x 25%
$26
$1 Capital loss net t

Problem 20-6
You own a call option on Intuit stock with a strike price of $40. The option will expire
inexactly 3 months time.
a. If the stock is trading at $55 in 3 months, what will be the payoff of the call?
Bought a call option
Strike Price
Spot price

Problem 28-9
which has a price of $40. You are thinking of buying TargetCo, which has earnings per
share of $2, 1 million shares outstanding, and a price per share of $25. You will pay for
Your Company:
Earnings per share
Shares outstanding
Price per shar

a.
Total Shares
Implied Price
8,000,000
$1,000,000
80%
2,000,000
10,000,000
$0.50
b.
Value
Shares
Per share
10,000,000
$0.50
$5,000,000
Total number of shares after the investment.
The venture capitalist must therefore own 2
million shares.
Per share
Prob

a.
PV = $5 million / 1.07 x 1.25=
$
5,841,121
b.
PV = $5 million x 1.215 / 1.04=
$
5,841,346
c.
I would say that the difference in the two methods are immaterial, $225, so the markets are therefore internationally integrated.
a.
PV = $4 million / 1.05 x 1

1.
Question :
(TCO D) Which of the following statements is not correct?
(a) When a corporation's shares are owned by a few individuals who
own most of the stock or are part of the firm's management, we say
that the firm is closely, or privately, held.
(b)