Corporate Finance Assignment | Custom Essay Help

PART A (25 points)

Mrs. Elizabeth, CFA is analyzing the value of PT Olahraga Tbk share for a one-month investment horizon. Today is 1 March 2020, and she is estimating a scenario as follows: Suppose that she purchases 10.000 shares of PT Olahraga Tbk. at Rp 7.000,- per share. Indonesian exchange requires her to put 55 percent on margin. On 1 April 2020, Mrs. Elizabeth has to pay interest on the amount borrowed at a rate of 2 percent per month. At 31 March 2020, PT Olahraga Tbk will pay a dividend of Rp 50,- per share. On 1 April 2020, Mrs. Elizabeth will sell the shares at Rp 7.100,- per share. She will use PT Saluran as a brokerage. PT Saluran charges Rp 400.000,- commission on the purchase and Rp 500.000,- on the sale of the stock. Mrs. Elizabeth’s required rate of return is 14 percent per annum.

Shall Mrs. Elizabeth buy PT Olahraga Tbk share on 1 March 2020? Justify your answer with a calculation.

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