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Document Preview: You decide XYZ Inc. stock is overpriced at $40 and...

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Question in attached file.
	
Document Preview: You decide XYZ Inc. stock is overpriced at $40 and you want to sell short the stock,	(a) What is the maximum number of shares you can sell if you have $10,000 to 	invest and the initial margin is 50% for short sales? Show your calculation	(b) What is the first price that results in a margin call if the maintenance margin on short positions is 30%? Show your calculation2. Find an estimate of cash flow for MSFT (Microsoft Corporation) (can use levered cash flow or EBITDA but make sure it is adjusted to be a per share calculation) and Using dividends, estimate the intrinsic value of the stock assuming a 0% growth rate for the next 2 years, a 6% growth rate in perpetuity thereafter, and a 9% discount rateUsing cash flows, estimate the intrinsic value of the stock assuming a 0% growth rate for the next 2 years, a 6% growth rate in perpetuity thereafter, and a 9% discount rate

Robert · Accepted Answer

1. You decide XYZ Inc. stock is overpriced at $40 and you want to sell short the 
stock,
 (a) What is the maximum number of shares you can sell if you have $10,000 to 
 invest and the initial margin is 50% for short sales? Show your calculation
 Amount of Investment ……………………$10,000 
 Initial Margin Required……………………50% 
 Price of Stock………………………………$40 
 No. of shares can sell……………………….($10,000/50%)/$40 =500 shares.
 (b) What is the first price that results in a margin call if the maintenance margin  
on short positions is 30%?

Question in attached file. Document Preview: You decide XYZ Inc. stock is overpriced at $40 and you want to sell short the stock, (a) What is the maximum number of shares you can sell if you have...

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