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A three-month call option is the right to buy stock at $20. Currently the stock is selling for $22 and the call is selling for $5. You are considering buying 100 shares of the stock ($2,200) or one call option ($500). a) If the price of the stock rises to $29 within three months, what would be the profits or losses on each position? What would be the percentage gains or losses? b) If the price of the stock declines to $18 within three months, what would be the profits or losses on each position? What would be the percentage gains or losses? c) If the price of the stock remained stable at $22, what would be the percentage gains or losses at the expiration of the call option? d) If you compare purchasing the stock to purchasing the call, why do the percentage gains and losses differ?
Instead, assume that the restructuring is completed and Martin is now 20% debt and 80% common equity. But the after tax cost of debt is 9% and the cost of common equity is 13.5%. What is Martin's new weighted average cost of capital?
Find out the amount of the specific payment needed to pay off the following purchases. Payments are made at the end of the period.
Describe the challenges that an organization will face when changing business processes and how information systems support business process.
Divido Corp. Is an all-equity financed firm with the total market value of $100 million. The company holds $10 million is cash equivalents and has $90 million in other assets.
Under these conditions, the tax rate will be 40%. If the changes are made, what will be the company's return on equity? Round your answer to two decimal places.
The Weighted Average Cost of Capital
Again using your answer to a suppose developments occur that leave investors expecting that dividends will not change from their current levels in the foreseeable future. Now what will be the value of Mercier stock?
What is the accounting break-even level of sales in terms of number of diamonds sold? What is the NPV break-even level of sales assuming a tax rate of 35%, a 10-year project life, and a discount rate of 12%?
assessing interest rate differentials among countries in countries experiencing high inflation the annual interest rate
trail guides inc. is currently evaluating two mutually exclusive investment. after doing a scenario analysis and
find the present value of the cash flows shown using a discount rate of 9
Assume the December CBOT Treasury bond futures contract has the quoted price of 89-09. The T-bond is a 20-year 6% coupon bond and interest is paid semi-annually. What is the implied annual interest rate inherent in the futures contract?
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