You have an arrangement with your broker to request 1050 shares of all available IPOs. Suppose that 9% of the​ time, the IPO is​ “very successful” and appreciates by 112% on the first​ day, 81% of the time it is​ “successful” and appreciates by 15%​, and 10 % of the time it​ “fails” and falls by 17%.

a. By what amount does the average IPO appreciate the first​ day; that​ is, what is the average IPO​ underpricing?

b. Suppose you expect to receive 60 shares when the IPO is very​ successful, 250 shares when it is​ successful, and 1 comma 050 shares when it fails. Assume the average IPO price is $ 19. What is your expected​ one-day return on your IPO​ investments?

Your firm is considering leasing a $ 50000 copier. The copier has an estimated economic life of eight years. Suppose the appropriate discount rate is 8.8% APR with monthly compounding.

Classify each lease below as a capital lease or operating​ lease, and explain​ why:

a. A​ four-year fair market value lease with payments of $ 1150 per month.

b. A​ six-year fair market value lease with payments of $ 790 per month.

c. A​ five-year fair market value lease with payments of $ 920 per month.

d. A​ five-year fair market value lease with payments of $ 995 per month and an option to cancel after three years with a $ 9100 cancellation penalty.