You purchase 17 call option contracts with a strike price of $95 and a premium of $3.75. Assume the stock price at expiration is $102.46.
a. What is your dollar profit? (Do not round intermediate calculations.)
b. What is your dollar profit if the stock price is $88.41?
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You are valuing an investment that will pay you $26,000 per year for the first 14 years, $34,000 per year for the next 10 years, and $47,000 per year the following 11 years (payments are at the end of each year). Another similar risk investment alternative is an account with a quoted annual interest rate of 7.50% with MONTHLY compounding of interest. What is the value in today's dollars of the set of cash flows you have been offered?
(If possible please solve in excel) :)
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IRRlMutually
exclusive projects Bell Manufacturing is attempting to choose the better of two mutually exclusive projects for expanding the firm'swarehouse capacity. The relevant cash flows for the projects are shown in the following table:
Initial investment $500,000 $320,000
Year
1 $130,000 $130,000
2 $120,000 $120,000
3 $130,000 $105,000
4 $200,000 $90,000
5 $250,000 $40,000
The firm's cost of capital is 17%.
a. Calculate the IRR for each of the projects. Assess the acceptability of each project on the basis of the IRRs.
b. Which project is preferred?
In: Finance
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Q12. Dormentor Inc. produces, converts, and markets packaging products including boxboard, container board, and numerous other specialty packaging products. In an attempt to increase its organic growth, the company decides to introduce new products. It asks the managers and employees to send in ideas for new products. Before launching products based on any of these ideas, what are the stages that the company has to go through? (1 point, word limit: 100 words)
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Mutually
exclusive projects Hook Industries is considering the replacement of one of its old metal stamping machines. Three alternative replacement machines are under consideration. The relevant cash flows associated with each are shown in the following table:
Initial investment $85,500 $59,900 $129,500
Year
1 $17,500 $11,500 $49,900
2 $17,500 $13,600 $29,700
3 $17,500 $16,000 $20,000
4 $17,500 $17,900 $20,100
5 $17,500 $19,500 $20,500
6 $17,500 $25,200 $30,100
7 $17,500 $0 $39,500
8 $17,500 $0 $50,000
The firm's cost of capital is 14%
a. Calculate the net present value (NPV)of each press.
b. Using NPV, evaluate the acceptability of each press.
c. Rank the presses from best to worst using NPV.
d. Calculate the profitability index (PI) for each press.
e. Rank the presses from best to worst using PI.
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Suppose you have $42,000 to invest. You’re considering Miller-Moore Equine Enterprises (MMEE), which is currently selling for $60 per share. You also notice that a call option with a $60 strike price and six months to maturity is available. The premium is $3. MMEE pays no dividends. What is your annualized return from these two investments if, in six months, MMEE is selling for $67 per share? What about $56 per share?
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Lambert Transport is an overland freight service that is operating at full capacity They have sales of $29,000, current assets of $1,600, current liabilities of $1,200, net fixed assets of $27,500, and a 12.8 percent profit margin. The firm has no long-term debt and does not plan on acquiring any. The firm does not pay any dividends. Sales are expected to increase by 11.9 percent next year. If all assets, short-term liabilities, and costs vary directly with sales, how much additional equity financing is required for next year?
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|
B&B has a new baby powder ready to market. If the firm goes directly to the market with the product, there is only a 65 percent chance of success. However, the firm can conduct customer segment research, which will take a year and cost $1.19 million. By going through research, B&B will be able to better target potential customers and will increase the probability of success to 80 percent. If successful, the baby powder will bring a present value profit (at time of initial selling) of $18.9 million. If unsuccessful, the present value payoff is only $5.9 million. The appropriate discount rate is 13 percent. |
|
Calculate the NPV for the firm if it conducts customer segment research and if it goes to market immediately. (Enter your answers in dollars, not millions of dollars, e.g., 1,234,567. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) |
| NPV | |
| Market immediately | $ |
| Research option | $ |
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Do Internet research to calculate capital intensity ratio for General Motors company in 2017. Then do the same for Google company in 2017.
Then reflect on capital intensity ratio for both companies, and identify one positive and negative point about capital intensive firms.
In your paper, submit your numbers for both firms in 2017 on (i) Capital Intensity Ratio, (ii) Sales, and (iii) total assets. MAKE SURE TO SHOW YOUR AS TO HOW YOU GOT YOUR FIGURES.
Hint: Capital intensity ratio is the reciprocal of total asset turnover.
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Explain Product life cycle theory of trade and provide examples of products that have gone through this cycle
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|
Suppose your company needs $17 million to build a new assembly line. Your target debt−equity ratio is .75. The flotation cost for new equity is 10 percent, but the flotation cost for debt is only 7 percent. Your boss has decided to fund the project by borrowing money because the flotation costs are lower and the needed funds are relatively small. |
| a. |
What is your company’s weighted average flotation cost, assuming all equity is raised externally? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) |
| Flotation cost | % |
| b. |
What is the true cost of building the new assembly line after taking flotation costs into account? (Enter your answer in dollars, not millions of dollars, e.g., 1,234,567. Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) |
| Amount raised | $ |
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Discuss the advantages and disadvantages of operating and financial leverage.
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One bond has a coupon rate of 7.2%, another a coupon rate of 8.6%. Both bonds pay interest annually, have 14-year maturities, and sell at a yield to maturity of 8.0%. a. If their yields to maturity next year are still 8.0%, what is the rate of return on each bond? (Do not round intermediate calculations. Enter your answers as a percent rounded to 1 decimal place.)
| Bond 1 | Bond 2 | |||
| Rate of return | ................ | % | ...................... | % |
Does the higher-coupon bond give a higher rate of return over this period?
Yes
No
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Simon recently received a credit card with a 12% nominal interest rate. With the card, he purchased an Apple iPhone 7 for $369.49. The minimum payment on the card is only $20 per month.
If Simon makes the minimum monthly payment and makes no other charges, how many months will it be before he pays off the card? Do not round intermediate calculations. Round your answer to the nearest whole number.
month(s)
If Simon makes monthly payments of $65, how many months will it be before he pays off the debt? Do not round intermediate calculations. Round your answer to the nearest whole number.
month(s)
How much more in total payments will Simon make under the $20-a-month plan than under the $65-a-month plan. Do not round intermediate calculations. Round your answer to the nearest cent.
$
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