If a firm reports $25 million of retained earnings on its balance sheet, could the board of directors declare a $25 million cash dividend without any concerns? Explain why or why not
What will be an ideal response?
The retained earnings on a firm's balance sheet represents the accumulation of net income over time that was not paid out as dividends. When realized, the R/E were not necessarily a cash flow thus we cannot assume cash is equal to the R/E figure. Further, the R/E are a source of internal funding used to finance existing assets. Thus, paying out R/E as dividends would almost certainly cause concerns.
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Matt owns 5,000 share of Matrix at $52.50. To arbitrage this he shorts 5,000 calls and longs 5,000 puts at a strike of $50.00. Assume = 0.16, ? = 0.30, rf = 0.06, and the options expire in 170 days
What is the value at risk for 1 week at a 95% confidence level? A) $0 B) $16,433 C) $18,433 D) $20,433