Explore BrainMass
Share

# Demand and new issue of stock

This content was STOLEN from BrainMass.com - View the original, and get the already-completed solution here!

Is it true that the "flatter" or more nearly horizontal, the demand curve for a particular firm's stock, and the less important investors regard the signaling effect of the offering, the more important the role of investment bankers when the company sells a new issue of stock?

#### Solution Preview

The response addresses the queries posted in 915 words with references.

// In order to write an expert opinion about the 'Demand Curve'; we have to first carefully analyze the situation. Here, we have to discuss the condition that , the "flatter" or more nearly horizontal, the demand curve for a particular firm's stock and the less important investors regard the signaling effect of offering the more important the role to investment bankers, when the Company sells a new issue of stock.//

Demand curve of a stock depicts the price- quantity relationship. The demand for a stock is dependant on many factors viz price, company profile, founder, past history, operational capacity, dividend policy etc. Steeper the demand curve, lower quantity of stock is demanded at higher price. Thus, corporate restore to stock split, to reduce the face value of stock thereby increasing the stock demand and liquidity. Flatter or more nearly horizontal demand curve indicates that the price of a stock remains range bound hence the quantity demanded for. The demand becomes perfectly elastic incase of a flat horizontal curve.

Such a flatter curve reflects that the price of the stock would remain the same irrespective of any change in market event. Any type of information viz. Public, insider or information embedded in financial statement would affect the price of the firm. Offering of such type of stock do not signal any change as the ...

#### Solution Summary

More than 750 words fully answering the question

\$2.19

## Linear programming model

1. Solve the following linear programming model by using the computer:

Maximize Z = 5x1 + 8x2
Subject to
3x1 + 5x2 &#8804; 50
2x1 + 4x2 &#8804; 40
x1 &#8804; 8
x2 &#8804; 10
x1, x2 &#8805; 0

2. Solve the following linear programming model by using the computer:

Minimize Z = 8x1 + 6x2
Subject to
4x1 + 2x2 &#8805; 20
-6x1 + 4x2 &#8804; 12
x1 + x2 &#8805; 6
x1, x2 &#8805; 0

3. Betty Malloy, owner of the Eagle Tavern in Pittsburgh, is preparing for Super Bowl Sunday, and she must determine how much beer to stock. Betty stocks three brands of beer - Yodel, Shotz, and Rainwater. The cost per gallon (to the tavern owner) of each brand is as follows:

Brand Cost/gallon
Yodel \$1.50
Shotz 0.90
Rainwater 0.50

The tavern has a budget of \$2,000 for beer for Super Bowl Sunday. Betty sells Yodel at a rate of \$3.00 per gallon, Shotz at \$2.50 per gallon, and Rainwater at \$1.75 per gallon. Based on past football games, Betty has determined the maximum customer demand to be 400 gallons of Yodel, 500 gallons of Shotz, and 300 gallons of Rainwater. The tavern has a capacity to stock 1,000 gallons of beer; Betty wants to stock up completely. Betty wants to determine the number of gallons of each brand of beer to order so as to maximize profit.

a. Formulate a linear programming model for this problem (written in a format similar to the way Problems 1 and 2 were presented).
b. Solve this problem by using the computer.

4. A jeweler and her apprentice make silver pins and necklaces by hand. Each week they have 80 hours of labor and 36 ounces of silver available. It requires 8 hours of labor and 2 ounces of silver to make a pin, and 10 hours of labor and 6 ounces of silver to make a necklace. Each pin also contains a small gem of some kind. The demand for pins is no more than six per week. A pin earns the jeweler \$400 in profit, and a necklace earns \$100. The jeweler wants to know how many of each item to make each week to maximize profit.

a. Formulate an integer programming model for this problem (written in a format similar to the way Problems 1 and 2 were presented).
b. Solve this problem by using the computer (note: if using QM for Windows, be sure to use the Integer and Mixed Integer Programming Module).

5. A transportation problem involves the following costs, supply and demand.

To
From 1 2 3 4 Supply
1 \$500 \$750 \$300 \$450 12
2 650 800 400 600 17
3 400 700 500 550 11
Demand 10 10 10 10

a. Formulate a linear programming model for this problem (written in a format similar to the way Problems 1 and 2 were presented).
b. Solve this transportation problem by using the computer (note: if using QM for Windows, be sure to select the transportation module).

View Full Posting Details