Ray's Jams Inc

question 97

Multiple Choice

Ray's Jams Inc.was just established with an investment of $5 million in stereo equipment.Ray expects his company to generate $800,000 a year for the next 200 years.If Ray's cost of capital is 15%,find the market value and book value of his company.

• A) market value = $9.0 million; book value = $5.0 million
• B) market value = $5.0 million; book value = $5.3 million
• C) market value = $5.33 million; book value = $5.0 million
• D) market value = $7.0 million; book value = $5.0 million

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Definitions:

Short 100 Shares

The action of selling 100 shares of stock that one does not own, betting that the stock's price will decline and it can be repurchased at a lower price for a profit.

Market Price

The current price at which an asset or service can be bought or sold in the market.

Short Transactions

Financial activities where securities are borrowed and sold with the expectation to buy them back at a lower price for a profit, betting on declining market prices.

Street Name

A practice where securities are held in the brokerage firm's name on behalf of a client, facilitating easier trade execution and maintenance.