An investor purchased call options for $2 per option. This investor purchased 1,000 of these call options on a stock that has a standard deviation of 20% and an exercise price of $140/share. The investor has a liquidity problem at this point and needs to sell the call options at current value. The current stock price is $120/share and the option will expire in a ½ year. What is the total profit or loss to the investor?
Answer AR= 20x20000=400,000 3-2 Debt Ratio Vigo Vacations has an equity multiplier of 2.5. The company’s assets are financed with some combination of long-term debt and common equity. What is the company’s debt ratio? Answer Equity multiplier Asset /equity = 2.5/1 A=L+E 2.5=1.5=+1 Debt/asset = 1.5/2.5 = .6 3-3 Market/Book Ratio Winston Washers’s stock price is $75 per share. Winston has $10 billion in total as- sets.
What is its ROE? ROE= profit margin*asset turnover*equity multiplier Asset turnover 3%= sales $100 million/$50 assets=2 equity multiplier=2 3%*2*2=12 3-6 Du Pont Analysis Donaldson & Son has and ROA of 10%, a 2% profit margin, and a return on equity equal to 15%. What is the company’s total assets turnover? What is the firm’s equity multiplier? ROA= 10%; Profit Margin =2%; ROE= 15% 10/2= S/TA=5 15/10=
7. Suppose Max's Shuttle Service wants to earn a profit before taxes of $375,000 in the coming year. Max's selling price is $40, its variable cost per unit is $20, and its fixed costs are $150,000. How many tickets must the company sell? a.
Sample quiz 2: Fin 819 1. Super Computer Company's stock is selling for $100 per share today. It is expected that this stock will pay a dividend of 5 dollars per share, and then be sold for $120 per share at the end of one year. Calculate the expected rate of return for Super Computer Company ‘s stock. A) 20% B) 25% C) 10% D) 15% E) None of the above Answer: B Response: r = (120+5-100)/100 = 25% 2.
. In 2003, David Corp. acquired 15,000 shares of its own $1 par value common stock at $18 per share. In 2004, David issued 10,000 of these shares at $25 per share. David uses the cost method to account for its treasury stock transactions. What accounts and what amounts should David credit in 2004 to record the issuance of the 10,000 shares?
They were given a 10% discount by the manufacturer. They paid $400 for shipping and sales tax of $3,000. Stine estimates that the machinery will have a useful life of 10 years and a residual value of $20,000. If Stine uses straight-line depreciation, annual depreciation will be • $3,760. • $4,072.
Answer AR= 20x20000=400,000 3-2 Debt Ratio Vigo Vacations has an equity multiplier of 2.5. The company’s assets are financed with some combination of long-term debt and common equity. What is the company’s debt ratio? Answer Equity multiplier Asset /equity = 2.5/1 A=L+E 2.5=1.5=+1 Debt/asset = 1.5/2.5 = .6 3-3 Market/Book Ratio Winston Washers’s stock price is $75 per share. Winston has $10 billion in total as- sets.
He projects that he will need to have $500,000 in 5 years in order to get the business off the ground. He has found an investment that will yield 12% interest compounded quarterly. How much will he need to invest today to have the amount he requires to start his practice? Part A: Table 6-2 Part B: 3% Part C: 20N Part D: PV = FV(IF) 500000(.55368) 276840 Problem 3: Elizabeth Corday is borrowing $20,000 at 11% over 6 years. She will make annual payments on the loan at the end of each year.
Illustration 4-2 compares accrual-based numbers and cash-based numbers. Suppose that Fresh Colors paints a large building in 2009. In 2009 it incurs and pays total expenses (salaries and paint costs) of $50,000. It bills the customer $80,000, but does not receive payment until 2010. On an accrual basis, Fresh Colors reports $80,000 of revenue during 2009 because that is when it is earned.