You are an analyst who follows Great Windows' stock. Although the current stock price is $37.50, you believe the stock is worth either $25 or $50, depending on the success of a new product launch. If Great Windows' CEO announces that she plans to buy 10,000 additional shares in the company, how will the share price change?

Suppose drug retailer CVS has an equity beta of 0.80 and a debt-equity ratio of 0.10. Estimate its asset beta assuming its debt beta is zero. Suppose CVS were to increase its leverage so that its debt-equity ratio was 0.50. Assuming its debt beta were still zero.

What would you expect its equity beta to be after the increase in leverage? 

Answer rating: 100% (QA)

SOLUTION The announcement from Great Windows CEO that she plans to buy 10000 additional shares in th... View the full answer