Question
Investment = $1,250,000 Company 1 Stock Price = $75 EPS = 3; ROE = 0.25; beta = 3; plowback = 0.8; R (f) = 0.04;
Investment = $1,250,000
Company 1 Stock Price = $75
EPS = 3; ROE = 0.25; beta = 3; plowback = 0.8; R (f) = 0.04; R (m) = 0.1; MRP = 0.06
Company 2 Stock Price = $155
EPS = 5; ROE = 0.10; beta = 1; plowback = 0.7; R (f) = 0.05; R (m) = 0.08; MRP = 0.03;
Allocation is 78% of the investment to stock with the highest return and 22% into the other.
Question: Company 2 is 30% leverage - what price is the margin call?
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Financial management theory and practice
Authors: Eugene F. Brigham and Michael C. Ehrhardt
13th edition
1439078106, 111197375X, 9781439078105, 9781111973759, 978-1439078099
