Mr. Aley bought 320 shares of Apple at $40 per share; he bought the stock at initial margin of 62%. The stock is now trading at $58.52 per share, and the federal reserve has recently lowered initial margin requirement to 51%. Aley now wants to do a little pyramiding and buy another 320 shares of stock. What is the minimum amount of equity that he will have to put up in this transaction? a. $6,588.96 b. $5,238.53 c. $4,796.27 d. $7,156.52

Zang Industries has hired the investment banking firm of Eric, Schwartz, & Mann (ESM) to help it go public. Zang and ESM agree that Zang's current value of equity is $55 million. Zang currently has 3 million shares outstanding and will issue 2 million new shares. ESM charges a 5% spread. How much cash will Zang raise net of the spread  Write out your answer completely.

2. An analyst for Acme, R. Runner, has recommended that Peter the Anteater purchase shares in a private firm (a firm that is not traded on any exchange) called Dynamite Corp. Dynamite has 30% debt and 70% equity. R. Runner believes that Dynamite will generate a return of 10% over the next year. Since Y. Lee is new to the job, he decides to do a little research on his own. He finds a company, Explosions Unlimited, that has very similar business as Dynamite. Explosions has an equity beta of 1.05 and is composed of 40% debt and 60% equity. Should Peter the Anteater buy the stock? The expected return on the market is 12% and the expected risk-free rate is 5%.

Zang Industries has hired the investment banking firm of Eric, Schwartz, & Mann (ESM) to help it go public. Zang and ESM agree that Zang’s current value of equity is $60 million. Zang currently has 4 million shares outstanding and will issue 1 million new shares. ESM charges a 7% spread. What is the correctly valued offer price, rounded to the nearest penny? How much cash will Zang raise net of the spread (use the rounded offer price)?

Todd Winningham IV has $5,700 to invest. He has been looking at Gallagher Tennis Clubs Inc. common stock. Gallagher has issued a rights offering to its common stockholders. Six rights plus $64 cash will buy one new share. Gallagher's stock is selling for $82 ex- rights. a-1. How many rights could Todd buy with his $5,700? (Do not round intermediate calculations and round your answer to the nearest whole number.) Number of rights a-2. Alternatively, how many shares of stock could he buy with the same $5,700 at $82 per share? (Do not round intermediate calculations and round your answer to the nearest whole number.) Number of shares b. If Todd invests his $5.700 in Gallagher rights and the price of Gallagher stock rises to $90 per share ex-rights, what would his dollar profit on the rights be? (First compute profit per right.) (Do not round intermediate calculations and round your answer to the nearest whole dollar.) Dollar profit

Your sister-in-law, a stockbroker at Invest Inc., is trying to sell you a stock with a current market price of $26. The stock's last dividend (Do) was $2.00, and earnings and dividends are expected to increase at a constant growth rate of 10 percent. Your required return on this stock is 20 percent. From a strict valuation standpoint, you should: a. Buy the stock; it is fairly valued. b. Buy the stock; it is undervalued by $3.00. c. Buy the stock; it is undervalued by $2.00. d. Not buy the stock; it is overvalued by $4.00. e. Not buy the stock; it is overvalued by $3.00.

Ray is about to go public. Its present stockholders own 530,000 shares. The new public issue will represent 1,000,000 shares. The shares will be priced at $20 to the public with a 10% spread. The out-of-pocket costs in addition to the spread will be $570,000. What are the net proceeds to Ray?

At the beginning of 2007, an investor buys 2 shares at $100 each. At the beginning of 2008, he buys another 3 shares at $120 each. At the beginning of 2009, he sells 1 share at $110 each. At the beginning of 2010, he sells the remaining 4 shares at $130 each. The stock does not pay any dividend. Calculate the dollar-weighted rate of return.