1. On August 1, Sonya sells short 100 shares of PDQ company stock for $100 per s
ID: 2641113 • Letter: 1
Question
1. On August 1, Sonya sells short 100 shares of PDQ company stock for $100 per share. On October 2, Sonya closes out the short sale at a cost of $90 per share. What is Sonya's profit or (loss) on the transaction
2. A company currently has $2.40 per share in free cash flows to equity (FCFE). The FCFE are anticipated to grow at 6% per year. If the investor
Explanation / Answer
1> Profit in Percentage =((SP-CP)/CP)*100=((100-90)/90)*100 11.11 SP=Sales Price and CP=Cost Price 2> Cash flow growing @6% Amount FV@14% Years of growth Year-0 : 2.4 2.4 3.56 3 Year-1 : 2.4*1.06 2.54 3.31 2 Year-2 : 2.4*1.06*1.06 2.70 3.07 1 Year-3 : 2.4*1.06*1.06*1.06 2.86 2.86 0 Value 12.79 FV=Amount*(1.14^Years of growth)
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