What is the per share intrinsic value of the call

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Reference no: EM132019036

1. Your firm is considering leasing a new computer. The lease lasts for 8 years. The lease calls for 8 payments of $8,000 per year with the first payment occurring immediately. The computer would cost $50,000 to buy and would be straight-line depreciated to a zero salvage value over 8 years. The actual salvage value is negligible because of technological obsolescence. The firm can borrow at a rate of 5%. The corporate tax rate is 34%. What is the after-tax cash flow from leasing relative to the after-tax cash flow from purchasing in year 0?

$50,000

$44,720

$42,000

-$37,650

-$8,000

2. Lexington Electronics stock is selling for $62 a share. One $60 call contract is valued at $252 and one $60 put contract is valued at $74. What is the per share intrinsic value of the call?

a $0

b $2.45

c $2.00

d $0.41

e $1.75

3. You purchased eight Hartford Construction call option contracts with a strike price of $35 when the option was quoted at $2.01. The option expires today when the value of Hartford Construction stock is $38.70. Ignoring trading costs and taxes, what is the total profit or loss on your investment?

a $1,594

b $876

c $1,080

d $1,352

e $3,210

Reference no: EM132019036

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