The share price in Beta is NOK 55. There are call and put options on Beta with 6 months at maturity and redemption price of NOK 50. The call options cost 8 kroner, while the put options cost 6 kroner. Risk-free interest rate is 3% for the period.

a) Show how you can create a strategy that provides a risk-free and secure gain.

A number of studies have documented underpricing in so-called IPOs (Initial Public Offerings). IN on average, the offer price is lower than the share price at the end of the first day trading on the stock exchange.

b) Give an explanation for the underpricing that is consistent with the market being efficient semi-strong form.

c) Which of the following statements is correct? Explain briefly.

i. You have discovered that stocks in small companies and companies with high book value in relation to market value (book-to-market) on average has higher return than other stocks. This observation is not consistent with weak-form efficiency.

ii. In a market that is efficient in semi-strong form, you can expect a return on your investment that reflects systematic risk.

iii. The share price will normally fall when the management of a company announces that they will buy back shares.

iv. Both (i), (ii) and (iii).

d) You have got a new job in Gladlaksen AS. The company farms salmon. The is now considering whether the company should expand production capacity. You have been given the task with calculating an equity return requirement that can be used in valuing the project. How do you want to proceed? Explain.

It is ex-dividend day for the company Uno Y AS. The company will pay a dividend of NOK 9 per action. The share price has fallen by NOK 7 to NOK 90 since the end of yesterday. Tax on dividend is 30%. Assume that the only thing that can explain the change in the share price is the dividend payment.

e) What is the tax rate for capital gains?

The share price in Bella AS is NOK 50. The company has 4 million outstanding shares. Man is considering a new project, and wants to raise new equity through a private placement. It is planned to sell 1 million new shares at an offer price of NOK 30.

f) Calculate the share price after the issue.

Alfa AS will acquire Beta AS. The total value of the two companies is 500 million NOK. Prior to the merger, Alfa has a debt of NOK 200 million, while the equity is worth 100 million kroner. Prior to the merger, Beta has a debt of NOK 50 million, while equity is valued at NOK 100 million.

g) Alfa AS shall pay the shareholders in Beta AS with shares in the merged company. How large a share of the shares in the company will the shareholders in Beta receive in the combined the company if half of the synergies go to the shareholders in Beta AS?