The following prices are available for call and put options on a stock priced at $50. The risk-free rate is 6 percent and the volatility is 0.35. The March options have 90 days remaining and the June options have 180 days remaining. The Black-Scholes model was used to obtain the prices.

Suppose you closed the spread 60 days later. What will be the profit if the stock price is still at $50?

Brad's Dilemma: Finding a New Job Brad Thomas, a 53-year-old retail store manager earning $75,000 a year, has worked for the same company during his entire 28-year career. Brad was recently laid off and is still unemployed 10 months later, and his severance pay and 6 months' unemployment compensation have run out. Because he has consistently observed careful financial planning practices, he now has sufficient savings and investments to carry him through several more months of unemployment. Brad is actively seeking work but finds that he is overqualified for available lower-paying jobs and under-qualified for higher-paying, more desirable positions. There are no openings for positions equivalent to the manager's job he lost. He lost his wife several years earlier and is close to his two grown children, who live in the same city.

Brad has these options:

Wait out the recession until another retail store manager position opens up.

Move to another area of the country where store manager positions are more plentiful.

Accept a lower-paying job for two or three years and then go back to school evenings to finish his college degree and qualify for a better position.

Consider other types of jobs that could benefit from his managerial skills.

1) What important career factors should Brad consider when evaluating his options?

2) What important personal factors should Brad consider when deciding among his career options?

3) What recommendations would you give Brad in light of both the career and personal dimensions of his options noted in Questions 1 and 2?

4)What career strategies should today's workers employ in order to avoid Brad's dilemma?

PG&C, Inc. a consumer products firm, is debating whether or not to convert its all-equity capital structure to one that is 40 percent debt. Currently, there are 500 shares outstanding and the price per share is $65. EBIT is expected to remain at $3000 per year forever. The interest rate on new debt is 7 percent, and there are no taxes.

a. Ms. Johnson, a shareholder of the firm, owns 100 shares of stock. What is her cash flow under the current capital structure, assuming the firm has a dividend payout rate of 100 percent?

b. What will Ms. Johnson' cash flow be under the proposed capital structure of the firm? Assume that she keeps all 100 of her shares.

c. [Extra 10% Credit Question] Suppose PG&C does convert, but Ms. Johnson prefers the current all-equity capital structure. Show how she could unlever her shares of stock to recreate the original capital structure.

Bellinger Industries is considering two projects for inclusion in its capital budget, and you have been asked to do the analysis. Both projects' after-tax cash flows are shown on the time line below. Depreciation, salvage values, net operating working capital requirements, and tax effects are all included in these cash flows. Both projects have 4-year lives, and they have risk characteristics similar to the firm's average project. Bellinger's WACC is 7%.

What is Project A's NPV? Do not round intermediate calculations. Round your answer to the nearest cent.

To solve the bid price problem presented in the text, we set the project NPV equal to zero and found the required price using the definition of OCF. Thus the bid price represents a financial break-even level for the project. This type of analysis can be extended to many other types of problems. Martin Enterprises needs someone to supply it with 145,000 cartons of machine screws per year to support its manufacturing needs over the next five years, and you’ve decided to bid on the contract. It will cost you $1,010,000 to install the equipment necessary to start production; you’ll depreciate this cost straight-line to zero over the project’s life. You estimate that, in five years, this equipment can be salvaged for $145,000. Your fixed production costs will be $585,000 per year, and your variable production costs should be $19.35 per carton. You also need an initial investment in net working capital of $130,000. Assume your tax rate is 25 percent and you require a return of 10 percent on your investment. a. Assuming that the price per carton is $30.00, what is the NPV of this project? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. Assuming that the price per carton is $30.00, find the quantity of cartons per year you can supply and still break even. (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) c. Assuming that the price per carton is $30.00, find the highest level of fixed costs you could afford each year and still break even. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Question 3 －－－－－finance corporate

The investment advisors always said “Don’t put all your eggs in one basket”. Do you agree? Discuss your viewpoints within 500 words. Use examples to illustrate your arguments and justify your conclusion.

1. I am considering one of two investments Growth, Inc and Value, Inc. The Treasury bill rate is 3% (risk-free rate) and the market or equity risk premium is 8%. Growth, Inc. costs $1,000 per share, has a P/E ratio of 75 and a beta of 3. Value, Inc. costs $100 per share, has a P/E ratio of 18 and a beta of 1. What are the implied growth rates for each of the firms? What are the PVGO (present value of growth opportunities) for each firm? If I form a portfolio with 100 shares of each, what is the beta and what is the P/E ratio of the portfolio?

. Consider a new line of equipment that will cost $1.7 million and will save a company $300,000 in operating expenses for the next ten years. The estimated salvage value in ten years is $250,000. The new equipment will not affect sales, but it will result in an increase in Net Working Capital of $230,000.

The new line will replace an old line of equipment that will last for four more years before it could be scrapped for $75,000. If sold today, the old equipment is worth $180,000. The old equipment was purchased five years ago for $1.1m and is being depreciated using the MACRS 7-year rates. The new equipment will also be depreciated using the 7-year rates. The company’s marginal tax rate is 30% and their cost of capital is 10%.

Calculate the NPV and IRR of this replacement project. What is the breakeven salvage value for the new machinery?   (20 pts.)

MACRS 7-year rates:

the following techniques for analyzing projects:

1. Payback Rule
2. Discounted Payback Period
3. Net Present Value
4. Internal Rate of Return

Why must corporate managers use multiple techniques of project evaluation?

Which technique is most commonly used and why?

Describe several ways the techniques above can be used as one progresses in their professional career. (Identify specific types of projects that can be analyzed and discuss the advantages and disadvantages of using the techniques above)

The following table lists the discount factors implied by the government spot curve for the next 4 years:

What would be the price of a 4 year 3.98% coupon bond with a Z spread of 89 bps, per $100 of par value?

Enter answer in percents.

Correct answer: 82.1536

1. Patricia has been renting a two bedroom house for years. She pays $1000 per month in rent for the apartment and $400 per year in property and liability insurance. The owner of the house wants to sell it, and Patricia is considering making an offer. The owner wants $180,000 for the property, but Patricia thinks she could get the house for $170,000 and use her $20,000 in 3% CDs that are ready to mature for the down payment. Patricia has talked to her bank and could get a 4.5% mortgage loan for 30 years to finance the remainder of the purchase price. Property taxes on the house are $2000 per year. Insurance would need to be upgraded to $900 a year and Patricia would incur about $1000 in costs the first year for maintenance. Property values are increasing at about 2% per year in the neighborhood. Patricia is in the 25% marginal tax bracket.
2. calculate the monthly mortgage payment for the mortgage loan.
3. whether Patricia should continue renting or would she be better off buying the home. For any numbers not included in the scenario but are on the worksheet just leave blank.

Real Madrid stadium requires seats for home and away end. The seating project results in $1.2 MM/yr of annual savings. The seating project requires a fixed capital investment of $3.5 MM. The working capital investment is taken as 15/85 of the fixed capital investment. The annual operating cost of the stadium seating is $0.5 MM/yr. Straight-line depreciation is calculated over 10 years (no salvage value). The corporate income tax rate for the project is 35%. Assuming a discount rate of 15%.. Assume that the FCI and WCI are expended immediately at the outset of the project.

a. Determine the NPV after 10 years, the Discounted Cash Flow Payback Period and the Discounted Cash Flow Return on Investment

i need 500 words on this topic no copy paste please.

Is the stock market "out of control?" How can the poor benefit from this financial institution?