(Solved)The fictional firm, Cromartium Inc, suffered large net losses due


Question Description:

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The fictional firm, Cromartium Inc, suffered large net losses due to unhedged foreign investments. As a result, its stock return was -70% in 2008. In 2009, the firm’s sales in Brazil increased by more than 35%, yet this increase was overshadowed by the drastic drop in the value of the Brazilian real against the dollar. Despite the CEO’s efforts to improve profitability, the stock had plummeted again, and the stock return was -50% in 2009. (a) What was the cumulative rate of return on the firm’s stock during the entire two year period of 2008-2009? What would be the share price at the end of 2009, if the price per share was $80 on Jan 1, 2008? (Assume no dividends, repurchases, or stock-splits during this period). (b) As a result of poor stock performance, the CEO resigned in 2010, and began doing shopping at discount stores. He or she purchased imported shoes that were marked down by 50%, and used a coupon for an additional 20% off. What was the effective percent discount on those shoes? These are the correct answers but I don’t know how to get it. (a) -85%, $12 (b) 60%

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