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You have taken a long position in a call option on IBM common stock. The option has an exercise price of $155 and IBM's stock currently trades at $158. The option premium is $10 per share and the contract size of the call option is 100 shares.
a. How much of the option premium is due to intrinsic value versus time value?
b. What is your net profit on one option contract if IBM's stock price increases to $170 at expiration of the option and you exercise the option?
c. What is your net profit if IBM's stock price decreases to $150?
Wilcox Corporation had income from continuing operations of $750,000 (after taxes) in 2014. In addition, the following information, which has not been considered, is as follows. In 2014, Wilcox experienced an uninsured earthquake loss in the amount o..
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Builtrite’s common stock is currently selling for $56 a share and the firm just paid an annual dividend of $3.20 per share. Management believes that dividends and earnings should grow at 9% annually. Based on this, and a marginal tax rate of 34%, wha..
In practice, a common way to value a share of stock when a company pays dividends is to value the dividends over the next five years or so, then find the “terminal” stock price using a benchmark PE ratio. Suppose a company just paid a dividend of $1...
VALUE OF CUSTOMER RELATIONSHIP MANAGEMENT
Suppose that Son of Son of Unkempt Inc. common stock will pay an annual dividend next year of $14.05, has net income of $562 million, is keeping back $178 in retained earnings, has common book value of $9,289 million, what would the common stock be w..
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Company X wants to acquire another similar company. It estimates that net cash flows for the acquired company will be $8,500,000 per year for 10 years. The cost is $50,000,000. The company's cost of capital is 10 percent. Calculate NPV, IRR, and MIRR..
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