In late 2009, you purchased the common stock of a company that has reported significant earnings increases in nearly every quarter since your purchase. The price of the stock increased from $12 a share at the time of the purchase to a current level of $45. Notwithstanding the success of the company, competitors are gaining much strength. Further, your analysis indicates that the stock may be overpriced based on your projection of future earnings growth. Your analysis, however, was the same one year ago and the earnings have continued to increase. Actions that you might take range from an outright sale of the stock (and the payments of capital gains tax) to a straight holding action. You reflect on these choices as well as other actions that could be taken. Describe the various actions that you might take and their implications.
Answer to relevant QuestionsWhich of the following securities is likely to be the most liquid according to this data? A U.S. firm wants to raise $15 million by selling 1 million shares at a net price of $15. We know that some say that firms “leave money on the table” because of the phenomenon of underpricing. a. Using the average ...What are sources of risk facing a firm which are reflected on its income statement? Explain the terms diversification and correlation in the context of forming portfolios. What is the real, or after-inflation, return from each of the asset classes listed in Table 12.4?
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