The current stock price is $65 and it will pay $3 dividends in 1 month and 4 months. A European at-the-money put option with 5 months to maturity is traded for $6.A European at-the-money call option with 5 months to maturity is $5. The spot rate for 1, 4, 5 months are 13%,11% and9.5%(c.c).
1.Is there an arbitrage opportunity? If yes describe the investment strategy that pays off today and has for sure zero cash flows at any time in the future.
2.What level in the interest rate ensures that markets are arbitrage free?
In: Finance
A firm has an excess cash flow of $4.8m. It had
3m shares outstanding and was considering paying a cash
dividend, corresponding to a 40% payout. The stock traded in the
market at $88.00 per share. Assume that the average investor holds
156 shares of the company’s stock.
Note: The term “k” is used to represent thousands (× $1,000).
Required: What would be the average portfolio value after a re-purchase scenario?
$Answerk Do not round intermediate calculations. Input your answer in thousands ($k) rounded to 3 decimal places (for example: 28.31k).
In: Finance
A firm has an excess cash flow of $4.8m. It had 3m shares outstanding and was considering paying a cash dividend, corresponding to a 40% payout. The stock traded in the market at $88.00 per share. Assume that the average investor holds 176 shares of the company’s stock.
Note: The term “k” is used to represent thousands (× $1,000).
Required: What would be the average portfolio value after a
re-purchase scenario?
$Answer Do not round intermediate calculations. Input your answer in thousands ($k) rounded to 3 decimal places (for example: 28.31k).
In: Finance
|
Please prepare a closing journal entry using the information given. You have been hired as an accountant for NFT Consulting Inc. This business was created when some friends decided to make use of their newly minted college degrees and go into business together. The business was created on November 1, 2017. The company will have a fiscal year end of October 31st. The initial formation transactions and early purchases for NFT Consulting Inc. resulted in the balances that are included in the first 2 columns of the Worksheet. (see the worksheet tab) |
|
| During November, the first month of operations, the following transactions occurred: | |
| Date | Event |
| 1-Nov | Paid $7,200 for 12 months rent on office space |
| 2-Nov | Purchased office furniture for $8,950. |
| 3-Nov | Purchased $11,354 of additional office supplies on account. |
| 8-Nov | Borrowed 20,000 from the bank for operating cash. The note has a 3% interest rate (simple interest) and is to be paid back in 4 years |
| 15-Nov | Received $10,800 from Fortuna Inc. for work to be performed over the next 12 months. |
| 20-Nov | Paid $1,560 for utilities. |
| 21-Nov | Performed services for various customers for $13,200 cash and another $18,100 on account. |
| 25-Nov | Paid $8,650 for purchases of supplies previously made on account. |
| 27-Nov | Paid salaries to employees totaling $5,200 for 1 week. |
| 30-Nov | Collected $12,300 as payment for amounts previously billed. |
| 30-Nov | Dividends of $3,000 were declared and paid. |
| At the end of November, the following additional information is available to help determine what adjustments are needed: | |
| 30-Nov | One month of the prepaid rent has been used up |
| 30-Nov | Supplies on hand are $8,150. |
| 30-Nov | One month of interest has accrued on the note payable for the bank loan. |
| 30-Nov | One month of the services for the Fortuna Inc. has been performed (see above). |
| 30-Nov | Salaries of $5,200 are paid every Friday (for a 5 day work week). November 30, 2017 was a Thursday. |
| 30-Nov | Additional work for customers of $9,580 has been performed during the last week of November but not yet billed |
| 30-Nov | Depreciation expense for the computer equipment is $140 and for the office furniture is $120 |
In: Accounting
Roth Corp. wants to raise $4.6 million via a rights offering. The company currently has 490,000 shares of common stock outstanding that sell for $35 per share. Its underwriter has set a subscription price of $27 per share and will charge the company a 4 percent spread. If you currently own 7,000 shares of stock in the company and decide not to participate in the rights offering, how much money can you get by selling your rights? (Do not round your intermediate calculations.)
In: Finance
3. Selected accounts from the December 31, 2015, adjusted trial balance of the Hodges Company are shown below.
|
Debit |
Credit |
|
|
Inventory, January 1, 2015 |
$30,000 |
|
|
Sales Revenue |
$90,000 |
|
Sales Returns and Allowances |
3,000 |
|
Purchases |
40,000 |
|
Freight-In |
2,500 |
|
Selling Expenses |
14,000 |
|
Administrative Expenses |
8,000 |
|
Bad Debts Expense |
500 |
|
Depreciation Expense-Building |
1,500 |
|
Interest Expense |
2,000 |
|
Income Tax Expense |
2,200 |
|
Dividends |
2,100 |
On December 31, 2015 the inventory was $18,000.
Required: Prepare a 2015 income statement for the Hodges Company.
ANSWER:
In: Accounting
Conscious Capitalism - Bikes Simulation I am sure individually each of you are happy/unhappy about the performance on certain measure(s) (net profit, market share, balanced scorecard, cumulative balanced scorecard, revenue, expense, cost, etc) of your team/company. Individually identify the performance criteria on which your company is performing below expectation and on which it's performing above expectation. Also, provide reasons for each of them. Next, describe if you personally could have done anything to help the performance. (Also, your response needs to be at least 3 paragraphs)
In: Finance
Net Present Value Method—Annuity
Jones Excavation Company is planning an investment of $125,000 for a bulldozer. The bulldozer is expected to operate for 1,000 hours per year for five years. Customers will be charged $90 per hour for bulldozer work. The bulldozer operator costs $30 per hour in wages and benefits. The bulldozer is expected to require annual maintenance costing $7,500. The bulldozer uses fuel that is expected to cost $15 per hour of bulldozer operation.
| Present Value of an Annuity of $1 at Compound Interest | |||||
| Year | 6% | 10% | 12% | 15% | 20% |
| 1 | 0.943 | 0.909 | 0.893 | 0.870 | 0.833 |
| 2 | 1.833 | 1.736 | 1.690 | 1.626 | 1.528 |
| 3 | 2.673 | 2.487 | 2.402 | 2.283 | 2.106 |
| 4 | 3.465 | 3.170 | 3.037 | 2.855 | 2.589 |
| 5 | 4.212 | 3.791 | 3.605 | 3.353 | 2.991 |
| 6 | 4.917 | 4.355 | 4.111 | 3.785 | 3.326 |
| 7 | 5.582 | 4.868 | 4.564 | 4.160 | 3.605 |
| 8 | 6.210 | 5.335 | 4.968 | 4.487 | 3.837 |
| 9 | 6.802 | 5.759 | 5.328 | 4.772 | 4.031 |
| 10 | 7.360 | 6.145 | 5.650 | 5.019 | 4.192 |
a. Determine the equal annual net cash flows from operating the bulldozer.
| Jones Excavation Company | |||
| Equal Annual Net Cash Flows | |||
| Cash inflows: | |||
| Hours of operation | |||
| Revenue per hour | × $ | ||
| Revenue per year | $ | ||
| Cash outflows: | |||
| Hours of operation | |||
| Fuel cost per hour | $ | ||
| Labor cost per hour | |||
| Total fuel and labor costs per hour | × $ | ||
| Fuel and labor costs per year | |||
| Maintenance costs per year | |||
| Annual net cash flows | $ | ||
Feedback
a. Subtract the operating expenses (hourly fuel and labor costs, multiplied by the operating hours, plus the annual maintenance costs) from the revenues (operating hours multiplied by the hourly revenue).
b. Determine the net present value of the investment, assuming that the desired rate of return is 10%. Use the table of present value of an annuity of $1 table above. Round to the nearest dollar.
| Present value of annual net cash flows | $ |
| Amount to be invested | |
| Net present value | $ |
c. Should Jones invest in the bulldozer, based
on this analysis?
Yes , because the bulldozer cost is less
than the present value of the cash flows at the minimum
desired rate of return of 10%.
d. Determine the number of operating hours such
that the present value of cash flows equals the amount to be
invested. Round interim calculations and final answer to the
nearest whole number.
hours
In: Accounting
Consider each of the transactions below. All of the expenditures
were made in cash.
The Edison Company spent $23,000 during the year for experimental purposes in connection with the development of a new product.
In April, the Marshall Company lost a patent infringement suit and paid the plaintiff $7,500.
In March, the Cleanway Laundromat bought equipment. Cleanway paid $17,000 down and signed a noninterest-bearing note requiring the payment of $23,500 in nine months. The cash price for this equipment was $36,000.
On June 1, the Jamsen Corporation installed a sprinkler system throughout the building at a cost of $39,000.
The Mayer Company, plaintiff, paid $23,000 in legal fees in November, in connection with a successful infringement suit on its patent.
The Johnson Company traded its old machine with an original cost of $12,900 and a book value of $6,300 plus cash of $10,200 for a new one that had a fair value of $13,300. The exchange has commercial substance.
Prepare journal entries to record each of the above transactions. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
In: Accounting
Ethical dilemmas have always surrounded businesses. For example, Jeffrey is a Senior Auditor working for a large commercial bank. He just realized Bob, the company’s vice president of marketing, has been using his expense account to purchase salacious materials online using his office computer; in addition, there are hotel bills charged to the account that cannot be explained by travel receipts. Jeffrey suspects the VP is having an affair with someone in the company. Jeffery is a CPA and the company where he works is publically traded. The CPA code-of-ethics and company policy requires Jeffrey to report the violation. Nevertheless, Bob is Jeffrey’s first cousin! Reporting the violation could destroy relations between Jeffrey’s mother and his aunt, Bob’s mother. What can Jeffrey do as a senior auditor to set the ethical standards in the company that he is working in? Which of the ethical theories best explains Jeffrey’s moral dilemma? How can one of the six theories you learned about in this chapter help Jeffrey to justify whistle blowing or help him to rationalize not whistle blowing?
In: Operations Management