On December 21, 2020, you purchased 100 shares of ABC company at $11 per share. You plan to sell your shares on December 21, 2021 and are concerned about downside risk. A put option on ABC stock with an exercise price (K) of $40 is currently priced (P) at $2 per share. Also, two call options on ABC stock with exercise prices (K) of $40 and $65 are priced (C) at $2.5 and $1.50 per share, respectively. All options expire on December 21, 2021. What will be net profit/loss per share on a long straddle if the stock price is $10 per share?
In: Finance
Round any decimals to 2 decimal places.
Suppose that there is natural monopoly that faces a demand curve Q=100-P with total cost function C(Q)=400+15Q.
The profit maximizing quantity for the natural monopolist, in the presence of an average cost pricing rule is _______ units.
The profit maximizing price that will set by the monopolist that will be set in the presence of an average cost pricing rule is $______
The average total cost per unit at the profit maximizing level of output in the presence of an average cost pricing rule is $_______
The profit for the natural monopolist under the average cost pricing rule, given they set the profit maximizing price and level of output, is $_______
In: Economics
Stock A has a beta of 1.5 and an expected return of 10%. Stock B has a beta of 1.1 and an expected return of 8%. The current market price for stock A is $20 and the current market price for stock B is $30. The expected return for the market is 7.5%. (assume the risk free asset is a T-bill).
8- What is the risk free rate?
A) 0.25%
B) 1.25%
C) 2.00%
D) 2.50%
E) None of the above
9- What is the expected return on a portfolio consisting of 100 shares of stock A, 60 shares of stock B and $2,200 worth of T-bills.
In: Finance
The machine produces annual units of 1,000 units. Each unit has sale price of $200 per unit and cost of $100 per unit. Sale price and cost will increase 3% per year. The tax rate is 25%.
If NWCt= 12% * Sale (t+1), what is FCF at year 2?
Given the machine is bought at $200,000 with shipping cost of $10,000 and installation cost of $30,000. The machine has economic life of 4 years.
Year MACRS
1 33%
2 45%
3 15%
4 7%
1) $103,508.40
2) -$6,250
3) $102,080
4)$145,600
5)$94,080
In: Finance
Faff plc wants to raise $200 million in equity via a rights
issue. The company has 100 million shares in circulation and the
current share price is $9. If the company decides to hire an
underwriter to advise them on the rights issue, the underwriting
fee will be 3 percent of proceeds assuming the new shares are
offered at a 25 percent discount. However, the Chief Financial
Officer of Faff plc believes that a 40 percent discount on new
shares will avoid the need for underwriting altogether.
Set out the terms of the issue under each of the two alternatives
referred to above. Compute the theoretical ex-rights price and the
value of a right. Explain the results.
In: Finance
h&M has just issued a callable (at par) 9 year, 9% coupon bond with annual coupon payments. The bond can be called at par in one year or anytime thereafter on a coupon payment date. It has a price of $96 per $100 face value. What is the bond's yield to call?
Apple has just issued a callable (at par) 9 year, 15% coupon bond with annual coupon payments. The bond can be called at par in one year or anytime thereafter on a coupon payment date. It has a price of $105 per $102 face value. What is the bond's yield to call?
In: Finance
4. A Company has just paid a dividend of 100 euros today (beginning of period 1). This company is at a mature stage and has a ROE of 10% and a payout ratio of 50%. The required return of the shareholders is rE=25%. It is estimated that the share can be sold at the end of the period (period 1) at a price equal to P1=1,210 euros, right after the dividend D1 of that period has been paid. What is the maximum Price that the shareholder would be willing to pay for this share today (beginning of period 1). Show work.
a) 1,052 euro
b) 6,051.25 euro
c) 1,100 euro
d) None of the above
In: Finance
| This Company produces a single product. Sales for the current year are 25,000 units. | ||||||||||
| Relevant data: | ||||||||||
| Selling price/unit | 130 | |||||||||
| Variable cost/unit | 80 | |||||||||
| Fixed costs | 1,300,000 | |||||||||
| a) | What is their net income for the current year? | |||||||||
| b) | Compute their breakeven point in sales units. | |||||||||
| c) | Marketing Director believes that unit sales would increase by 20% if the price were cut by 10%. | |||||||||
| Should they take this action? Explain. | ||||||||||
| d) | Production Manager is considering outsourcing the production of some parts. This would reduce fixed | |||||||||
| costs to $1,000,000, but increase variable cost/unit to $100. | ||||||||||
| What would the breakeven point be if this action were taken? | ||||||||||
In: Accounting
ABC Corporation has $100 million in debt outstanding. The debt has 4 years to maturity and a 6% coupon. The debt has a par value of $1,000 per bond and interest is paid semi-annually. The current price of the bond is 105.25 as a percent of par.
The company has 10 million of stock outstanding with a market price of $25 per share. The stock has a beta of 1.24 with the market.
The company is in the 25% tax bracket and the risk-free rate is 4% with a 6% market risk premium.
What is the weighted average cost of capital (WACC) for ABC Corporation?
Group of answer choices
14.32%
5.12%
9.15%
12.82%
In: Finance
Please answer the question below, thanks!
1. Suppose a company has estimated the following cash flows in each of the next three years for operations in various countries.
|
Year |
New Zealand |
Japan |
|
1 |
160 NZD |
16,415 JYP |
|
2 |
174 NZD |
17,844 JYP |
|
3 |
181 NZD |
18,401 JYP |
If the USD/JPY is 100 and the USD/NZD is 110, what are the expected cash flows in each of the next three years?
.
2. If the Euro ask price is $1.35 and the Euro bid price is $1.28, what is the bid-ask spread in percentage terms?
.
3. States THREE factors that influence exchange rates.
In: Finance