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Calculating Option Values

The price of stock will be either $60 or $80 at the end of year. Call options are available with one year to expiration. T-bills currently yield 5 percent. Suppose the current price of stock is $70. What is the value of the call option of the exercise price is $45 per share?

Semi strong from efficient

You do a study and find out that on average stock prices for firms decrease 3% evfor every 5% decrease in inside ownership. you are watching teh nightly business report and find out hat Magic Tape's stock has announced that insiders have sold 10% of their holdeing .. You are concerned because you own 1,000 shares of Magic Tape

New stock offering

You work for abc in the finance department and own shares that are selling at $20 per share on the NYSE. There is a new stock offering that is going to be publicly announced. the cost from the offering will be 10% of the new offerning. The new offering will increase the number of outstanding share by 30%. There are currently 2

Client mix decision: Maximize Loren's Monthly Commissions

Client mix decision. a) Based on data given what client mix will maximize Loren's monthly commissions, assuming he works 160 hours per month? b) What other factors should Loren consider as he makes his decisions about his client mix? Customer Group A Average investment in company products per mo. $900 Hrs. devoted per custome

Rates of Return and Equilibrium

The beta coefficient for stock C is bc=0.4 and that for stock D is bd=-.05. (stock D's beta is negative, indicating that its rate of return rises whenever returns on most other stocks fall. There are very few negative beta stocks, although collection agency and gold mining stokcs are sometimes cited as examples)

Patent Amortization Expenses

In early January 2011, Lopez purchased a patent for $60,000 that was used exclusively for a single research project conducted during 2011. Lopez uses straight-line amortization over the maximum allowable periods(20yrs). In addition, on July 1, 2011, Lopez incurred legal fees of $23,400 to defend the new patent that had been acqu

Current Stock Price of the Francis Company

The Francis Company is expected to pay a dividend of D = $1.25 per share at the end of the year, and that dividend is expected to grow at a constant rate of 6.00% per year in the future. The company's beta is 1.45, the market risk premium is 5.50%, and the risk-free rate is 4.00%. What is the company's current stock price? $2

Grossnickle Corporation: Current Price of Bonds

Scenario: Grossnickle Corporation issued a 20-year, non-callable, 6.3% annual coupon bonds at their par value of $1,000 one year ago. Today, the market interest rate on these bonds is 5.5%. What is the current price of the bonds, given that they now have 19 years to maturity? $1,136.58 $950.79 $1,289.58 $1,049.15


Scenario: Bobbie B. Beebee and I are looking at AT&T's stock because we are both very wealthy stock market investors. We usually spend summers together in the Swiss Alps (at his expense....you see, he likes me and we are pals). We agree on the expected dividend AT&T will be paying. For your information, BBBBB (that's what al

Financial Management with a Health Care Organization

1. (Total revenue/inpatient revenue) x (inpatient days) = a. patient days b. adjusted patient days c. adjusted discharges d. average length of stay (days) 2. (Total operating revenue - total operating expenses) / (total operating revenue) = a. operating income b. operating margin c. current ratio (x) d. cushion ra

Default Risk Premium

Suppose 10-year T-bonds have a yield of 5.30% and 10-year corporate bonds yield 6.80%. Also, corporate bonds have a 0.25% liquidity premium versus a zero liquidity premium for T-bonds, and the maturity risk premium on both Treasury and corporate 10-year bonds is 1.15%. What is the default risk premium on corporate bonds? 1.1

Maturity Risk Premium

Kelly Inc's 5-year bonds yield 7.50% and 5-year T-bonds yield 5.80%. The real risk-free rate is r* = 2.5%, the default risk premium for Kelly's bonds is DRP = 0.40%, the liquidity premium on Kelly's bonds is LP = 1.3% versus zero on T-bonds, and the inflation premium (IP) is 1.5%. What is the maturity risk premium (MRP) on all 5

The Isberg Company: Current Stock Price

The Isberg Company just paid a dividend of $0.75 per share, and that dividend is expected to grow at a constant rate of 5.50% per year in the future. The company's beta is 1.25, the market risk premium is 5.00%, and the risk-free rate is 4.00%. What is the company's current stock price, P? $15.49 $16.66 $14.66 $19.32 $

Forecasting Risk and Cost-Cutting Proposal

Forecasting Risk - What is forecasting risk? in general, would the degree of forecasting risk be greater for a new product or a cost-cutting proposal? Why? 2. Sensitivity analysis and Scenario analysis- What is the essential difference between sensitivity analysis and scenario analysis? 3.Marginal cash flows - A co-wor

ACCOUNTING PROBLEM (see attachment for word doc)

Part: 1 The Following information was reported by Gap, Inc in its 2006 annual report. 2006 2005 2004 2003 2002 Total assets $8,544 $8,821 $10,048 $10,713 $10,283 (In Millions) Working Capital $2,757 3,297 $ 4,062 $4,156 $2,972 Current ratio 2.2

Fixed cost and Variable cost

1 page Details: Costs can be classified into two categories, fixed and variable costs. These costs behave differently based on the level of sales volumes. Suppose we are running a restaurant and have identified certain costs along with the number of annual units sold of 1000. Item: Raw Materials (cost for hamburge

Amount of Annual Dividend: Example Problem

Suppose you are willing to pay $30 today for a share of stock which you will expect to sell at the end of year one for $32. If you require and annual rate of return of 12%, what must be the amount of the annual dividend which you expect to receive at the end of year one?

Determining Present Value of Cash Flow Stream: Example Problem

Assume that your required rate of return is 12% and you are given the following streams of cash flow: Year Cash Flow 0 $10,000 1 $15,000 2 $15,000 3 $15,000 4 $15,000 5 $20,000 If the payments are made at the end of each period, what is the PV of the cash flow stream?

Operating cycles

Indicate the impact of the following on the cash and operating cycles, respectively. Use the letter I to indicate an increase, the letter D for a decrease and the letter N for no change: a. The terms of cash discounts offered to customers are made less favorable. b. The cash discounts offered by suppliers are decreased; thus

Estimating given stock's price

Sorenson Corp.'s expected year-end dividend is D1 = $1.50, its required return is rS = 12.00%, its dividend yield is 8.00%, and its growth rate is expected to be constant in the future. What is Sorenson's expected stock price in 7 years, i.e., what is P7?

Stock Valuation

The Isberg Company just paid a dividend of $0.80 per share, and that dividend is expected to grow at a constant rate of 6.00% per year in the future. The company's beta is 1.25, the market risk premium is 5.00%, and the risk-free rate is 4.00%. What is the company's current stock price? $19.95 $20.45 $20.96 $21.49

Kalpert common stock

A security analyst forecasts the dividends of Kalpert Enterprises for the next three years. Her forecast is D1=$1.50, D2=$1.75, and D3=$2.20. She also forecasts a price in three years of $48.50. The rate of return for similar-risk common stock is 14%. What is the value of Kalpert common stock?

Finance, Discount Rate, and Retained Earning

Calculate the cost of Retained Earnings, then the cost of newly issued stock. The flotation cost is 12%, so the net value of the stock is 88% of the market price " Cost of Retained Earnings" " Cost of newly issued stock" Current Price of stock $8.24 Growth Rate 3.00% Last Dividend Paid is $1.20 "Calculate the Disco

Break even analysis

How could breakeven analysis be applied to the decision making process involved in introducing a new service? Are there any constraints to using this method to make a decision regarding the implementation of a new service?

Number of Months to Grow an Investment

I am stomped on finding the solution to these problems. Please help me figure out how to solve on my financial calculator. You are considering investing in a bank account that pays a nominal annual rate of 6.5%, compounded monthly. If you invest $3,400 at the end of each month, how many months will it take for your account

Finance Problems

1. Paying a stock dividend ________ the retained earnings account. 1. 1. increases 2. 2. has no effect on 3. 3. reorganizes 4. 4. decreases 2. Firms are usually prohibited by state law from distributing 1. 1. retained earnings as dividends. 2. 2. dividends in a year the firm has a net loss. 3.

Statement of cash flows

The following account balances relate to the stockholders' equity accounts of Gore Corp. at year-end. 2008 2007 Common stock, 10,500 and 10,000 shares, respectively, for 2008 and 2007 $160,000 $140,000 Preferred stock, 5,000 shares 125,000 125,000 Retained earnings 300,000 260,000 A small