1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
hram777 [196]
2 years ago
9

Consider a single period problem where the riskless interest rate is zero, and there are no taxes. A firm consists of a machine

that will produce cash flows of $210 if the economy is good and $80 if the economy is bad. The good and bad states occur with equal probability and the covariance of these states with the market portfolio is zero (no systematic risk). Initially, the firm has 100 shares outstanding and debt with a face value of $50 due at the end of the period. What is the share price of the firm
Business
1 answer:
kifflom [539]2 years ago
8 0

Assuming the firm has 100 shares outstanding and debt with a face value of $50 due at the end of the period. The share price of the firm is $0.95.

<h3>Share price</h3>

First step is to calculate the expected payoff to equity

Expected equity=[($80 ×0.5) + ($210 × 0.5)]-$50

Expected equity=($40+$105)-$50

Expected equity = $145-$50

Expected equity=$95

Now let calculate the share price

Share price=$96/100 shares

Share price=$0.95

Inconclusion the share price of the firm is $0.95.

Learn more about share price here:brainly.com/question/1166179

You might be interested in
On October 10, the stockholders’ equity of Sherman Systems appears as follows. Common stock–$10 par value, 77,000 shares authori
Vikki [24]

Answer:

See the explanation below:

Explanation:

1. Prepare journal entries to record the following transactions for Sherman Systems

a. Purchased 5,500 shares of its own common stock at $30 per share on October 11.

<u>Details                                                            Dr ($)               Cr ($)   </u>

Treasury Stock (5,500 × 30)                         165,000

Cash                                                                                      165,000

<u><em>To record the repurchase of own common stock                            </em></u>

b. Sold 1,125 treasury shares on November 1 for $36 cash per share.

<u>Details                                                            Dr ($)               Cr ($)     </u>

Cash (1,125 × 36)                                            40,500

Treasury Stock (1,125 × 30)                                                  33,750

Paid-in Capital from Sale of Treasury Stock                        6,750

<em><u>To record the sale of treasury stock.                                                      </u></em>

c. Sold all remaining treasury shares on November 25 for $25 cash per share.

<u>Details                                                                Dr ($)               Cr ($)     </u>

Cash (4,375 × 25)                                                109,375

Paid-in Capital from Sale of Treasury Stock       6,750

Retained Earnings                                                15,125

Treasury Stock 99,000 (4,375 × 30)                                       131,250

<em><u> To record the sale of the remaining treasury shares                               </u></em>

Kindly note that there is a balance of $6,750 in the Treasury Stock Paid-in Capital account. Since it is utilized, the remaining deficit will show in Retained Earnings.

2. Prepare the stockholders' equity section after the October 11 treasury stock purchase.

<u>Details                                                                                            $     </u>

77,000 issued authorized common stock–$10 par value    770,000

Paid-in capital in excess of par value, common stock           241,000

Retained earnings                                                                    904,000

Treasury stock                                                                        <u> (165,000)</u>

Total stockholders’ equity                                                      <u>1,750,000</u>

3 0
3 years ago
What is the term baltes &amp; baltes use to designate the ways workers narrow their job tasks to only the most important ones an
navik [9.2K]

The term is "selection".

Paul B. Baltes was a German therapist whose expansive scientific plan was dedicated to building up and advancing the life-span orientation of human advancement. He was likewise a scholar in the field of the psychology of aging. Baltes was born in 1939 and died in 2006 at the age of sixty-seven.

8 0
3 years ago
What is the purpose of the 1040 series of tax forms?
melamori03 [73]
It is the standard (IRS) form that individuals use to file their annual  income tax returns
6 0
3 years ago
Read 2 more answers
An example of an externality is the impact of
stepan [7]
Increases in health care costs on the health of individuals in society.
8 0
3 years ago
Blackberry syrup can be sold for $2.90 per​ unit, or it can be processed further into a specialty blackberry juice and then sold
Maksim231197 [3]

Answer:

The operating income would increase by $2.54 for each unit sold

Explanation:

If the blackberry syrup is further processed into the specialty blackberry juice, an extra income of $2.54 ($5.40 - $2.90 = $2.54) would be made on each unit sold

4 0
3 years ago
Other questions:
  • A buyer is getting a fully amortized loan for $220,000. The bank will give the buyer the loan for 15 years at 5 1/2% or for 30 y
    9·1 answer
  • Darla sells roses in a competitive market where the price of a rose is $5. use this information to fill out the revenue columns
    5·1 answer
  • If all monopolistically competitive firms had identical cost curves:_________.a. the industry would remain monopolistically comp
    9·1 answer
  • Suppose that the market equilibrium price for a good is $3.00. A nonbinding price ceiling in this market will result in a price
    10·2 answers
  • ADRIAN CORP. SELLS GOODS ON ACCOUNT FOR $100000 ON MAY 1. ON MAY 15, THE CUSTOMER RETURNS $40000 OF THE MERCHANDISE. THE CUSTOME
    9·1 answer
  • What is ecotourism? Write a short essay that includes the following information:
    14·1 answer
  • What is true about credit unions?
    13·2 answers
  • Aspen Integrated Marketing used to have a strict hierarchical structure, with information given only to those who required it. T
    8·1 answer
  • The money supply fell during the Great Depression because __________
    9·1 answer
  • David, a real estate broker representing the seller, received an offer on his client's property for $450,000, $50,000 below the
    9·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!