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The current stock price of Alcoa is $70 and the stock does not pay dividends. The instantaneous risk free rate of return is 6% p.a continuously compounded. The instantaneous standard deviation of Alcoa's stock is 40% p.a. You wish to purchase a call option on this stock with an exercise price of $75 and an expiration date 30 days from now. Based on the Black-Scholes option pricing formula, what is the value of d1 for the option.
If a firm buys trade credit terms of 4/15, net 60 and decides to forgo the trade credit discount and pay on the net day, what is the annualized cost of forgoing the discount ( assume a 360 -day year). The Annualized cost of trade credit terms of 4/15..
Marshall's & Co. purchased a corner lot in Eglon City five years ago at a cost of $690,000. The lot was recently appraised at $747,000. At the time of the purchase, the company spent $35,000 to grade the lot and another $4,700 to build a small buildi..
Calculate the QSD. Develop an interest rate swap in which both Alpha and Beta have an equal cost savings in their borrowing costs. Assume Alpha desires floating-rate debt and Beta desires fixed-rate debt.
Assume that the average firm in your company's industry is expected to grow at a constant rate of 4% and that its dividend yield is 7%. Your company is about as risky as the average firm in the industry, but it has just successfully completed some R&..
A bond makes coupon payments semiannually. Suppose its coupon rate is 6%, the interest rate is 8%, and it matures in 4 years. What is the present value of the bond? How much will it be worth one year from now? How much will it be worth in 4 years?
1- explain the basic differences between the operation of a currency forward market and a futures market?2- in the
what is the value of the portfolio return?
What is the equivalent annual savings from the purchase if Gluon uses straight-line depreciation?- The opportunity cost of capital is 11%, and the firm's tax rate is 40%.
Suppose that the current price of eBay is $40 per share. You buy 500 shares, using $10,000 of your own money and borrowing the remainder of the purchase price from your broker. The interest rate on the margin loan is 2% per month, and the maintenanc..
Compute the indifference point level of EBIT between the common stock option and the preferred stock option.- Is there an indifference point between the debt and preferred stock options?
Use the below information to answer the following question. Income Statement For the Year Sales $42,700 Cost of goods sold 29,250 Depreciation 3,750 Earnings before interest and taxes $ 9,700 Interest paid 1,360 Taxable income $ 8,340 Taxes 2,840. Th..
Calculate the EVA for both divisions. What are the potential problems in the measurement of EVA and using EVA to compare these two divisions?
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