1. How do margin trades magnify both the upside potential and the downside risk of an investment position? Explain with examples.
2. What do you consider to be the “optimal” distribution policy and why?
3. A Company manufactures watches which are sold through discount stores. Each watch is sold for $25; fixed costs are $140,000 for 30,000 or less; variable costs are $15 per watch. What is the firm's EBIT at a sales level of 30,000 watches?