...CHAPTER 10 Properties of Stock Options Practice Questions Problem 10.1. List the six factors affecting stock option prices. The six factors affecting stock option prices are the stock price, strike price, risk-free interest rate, volatility, time to maturity, and dividends. Problem 10.2. What is a lower bound for the price of a four-month call option on a non-dividend-paying stock when the stock price is $28, the strike price is $25, and the risk-free interest rate is 8% per annum? The lower bound is [pic] Problem 10.3. What is a lower bound for the price of a one-month European put option on a non-dividend-paying stock when the stock price is $12, the strike price is $15, and the risk-free interest rate is 6% per annum? The lower bound is [pic] Problem 10.4. Give two reasons that the early exercise of an American call option on a non-dividend-paying stock is not optimal. The first reason should involve the time value of money. The second reason should apply even if interest rates are zero. Delaying exercise delays the payment of the strike price. This means that the option holder is able to earn interest on the strike price for a longer period of time. Delaying exercise also provides insurance against the stock price falling below the strike price by the expiration date. Assume that the option holder has an amount of cash [pic] and that interest rates are zero. When the option is exercised early it is worth [pic] at expiration. Delaying exercise...
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...assets amounted to R450 000 while Juliette’s amounted to R200 000 and these figures were stated in their ante-nuptial contract. The weighted average consumer price index (CPI) at the commencement of the marriage was 71.62. Romeo’s financial affairs: Assets/property and liabilities Base cost Market value Liability Residential property R2 500 000 R5 200 000 R1 900 000 Share portfolio R2 300 000 R5 600 000 Bank investments R 400 000 Motor vehicle R 400 000 R 300 000 R 250 000 Income tax R 84 000 Insurance portfolio: Death benefit Life cover benefit payable on death Life policy payable to the estate R2 500 000 Life policy payable to Juliette R3 100 000 Keyman policy owned by his employer R1 300 000 Retirement Annuity fund R2 200 000 In terms of Romeo’s Last Will and Testament, he leaves his residential property to his spouse and the residue of the estate to his child. Romeo’s marginal tax rate is 40% Question 1 (5 marks) Calculate the executor’s fees payable in the event of Romeo’s death. Show your calculations. Question 2 (10 marks) 2.1 Indicate which assets will not attract CGT in the event of Romeo’s death and explain why not. 2.2 Calculate the CGT payable in the event of Romeo’s death. Show all your calculations Question 3 (22 Marks) 3.1 Explain whether the Annuity proceeds payable on his death will attract estate duty. 3.2...
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...00 Moving to an outside vendor will allow Clark Equipment to reduce their overhead costs by 70%. What is the maximum purchase price the company should consider to move to an outside vendor without respect to any other issue? (present calculations for partial credit). Label your answer. Q2 When considering a move to outsourcing a process, eliminating a department and all its employees, what issues should be considered? These issues should be financial as well as strategic. Your answer should be presented as a bulleted list. Q3 What issues should be considered when deciding whether to eliminate a department in a retail store? Your answer should discuss the issues of profitability and include the concept of the contribution format income statement as well as the effect on sales for the store. Q4 How might the use of a predetermined overhead rate compare to the actual results of the activities affected by the predetermined overhead rate? Your answer should begin by explaining how a predetermined overhead rate is calculated and conclude with why there would be variances from the original estimated values in the calculation (do not discuss any variables except those directly related to the predetermined overhead rate calculation). Q5 What is the first budget and why is that important? How does it affect all remaining budgets? Q6 Describe the specific items you would...
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...Considering, the incremental return on investment, or the additional revenue generated from each resource profile investment. Each of the strategies has financial costs and benefits. These are discussed below. 1) Ten per cent increase through efficiency The efficiency improvement strategy carries no costs and should yield 10 per cent on the bottom line, or about an additional $12,100 profit. The calculations are: $550,000 annual revenue x 2% margin = $11,000 net profits $11,000 net profit x 10% efficiency improvement = $1,100 $11,000 + 1,100 = $12,100 increase in net profits 2) Add adventure diving The adventure diving resort strategy will require about $15,000 to get started. It should yield about $95,680 additional revenue. The calculations are: 8 divers per trip x $115 for each diver = $920 revenue per trip $920 each trip x 2 dives per week - $1,840 revenue per week $1,840 revenue per week x 52 weeks = $95,680 annual adventure diving revenue 3) Focus on family diving The family diving resort strategy will cost $60,000 to $160,000 (in renovations and improvements) and should yield at least an additional $157,000 over current revenues, assuming no increases in prices. If Coral Divers raises its prices to equal other family resorts, the revenues should be even higher. Two methods of calculation are shown below. Method 1: Occupancy during high season is 90 per cent, so: 90% (“x”) = 0.90x [where “x” equals total seasonal...
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... FSDr2 Running costs and depreciation | Marks: Part A -Report (40%) Part B- In class Assessment Task (60%) | Weighting: 20 % | Outcomes to be assessed: MGP-1 uses mathematics and statistics to compare alternative solutions to contextual problems MGP-2 represents information in symbolic, graphical and tabular form MGP-3 represents the relationships between changing quantities in algebraic and graphical form MGP-5 demonstrates awareness of issues in practical measurement, including accuracy, and the choice of relevant units MGP-6 models financial situations relevant to the student’s current life using appropriate tools MGP-7 determines an appropriate form of organisation and representation of collected data MGP-8 performs simple calculations in relation to the likelihood of familiar events MGP-9 uses appropriate technology to organise information from a limited range of practical and everyday contexts MGP-10 justifies a response to a given problem using appropriate mathematical terminology. | Buying a car Candice is 24 years old, single and lives in Orange, New South Wales. She works full-time (five days per week) at Bathurst Base Hospital in Bathurst. Candice needs to purchase a car to travel to and from work and to use on weekends. She estimates that, on average, she drives 30 kilometres each weekend. Most of her driving is on the open road. The car will be parked in...
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... 2. a. and b. can be found in the case model. c. and d. require you to use the effective interest rates calculated in question 1 above. Then you can use the case model to find the future values. 3. Templates for both a. and b. are in the model. 4. a. Refer to the model for guidance. b. and c. can be solved using the model. d. and e. will require that you use a financial calculator, given the complexity of the problems. There are several calculators on the internet. (See the Web Sites section of this site.) The key inputs are: interest rate, future value, number of annual payments, and amount of each payment. f. is another bonus opportunity (one point). For this bonus question, you have to make an assumption that, under annual compounding, the bank will pay interest on the mid-year payments, and the rate for those payments is that rate which produces an effective annual rate of 10.0 percent. 5. Same comments as for question 4 above, and again one bonus point is possible for f. Also, I couldn’t find a calculator on the web that would do ‘annuity due’ calculations (d. and e.); so you may have to use a real...
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...hp 12c financial calculator user's guide H Edition 4 HP Part Number 0012C-90001 File name: hp 12c_user's guide_English_HDPMBF12E44 Printed Date: 2005/7/29 Page: 1 of 209 Dimension: 14.8 cm x 21 cm Notice REGISTER YOUR PRODUCT AT: www.register.hp.com THIS MANUAL AND ANY EXAMPLES CONTAINED HEREIN ARE PROVIDED “AS IS” AND ARE SUBJECT TO CHANGE WITHOUT NOTICE. HEWLETT-PACKARD COMPANY MAKES NO WARRANTY OF ANY KIND WITH REGARD TO THIS MANUAL, INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY, NON-INFRINGEMENT AND FITNESS FOR A PARTICULAR PURPOSE. HEWLETT-PACKARD CO. SHALL NOT BE LIABLE FOR ANY ERRORS OR FOR INCIDENTAL OR CONSEQUENTIAL DAMAGES IN CONNECTION WITH THE FURNISHING, PERFORMANCE, OR USE OF THIS MANUAL OR THE EXAMPLES CONTAINED HEREIN. © Copyright 1981, 2004 Hewlett-Packard Development Company, L.P. Reproduction, adaptation, or translation of this manual is prohibited without prior written permission of Hewlett-Packard Company, except as allowed under the copyright laws. Hewlett-Packard Company 4995 Murphy Canyon Rd, Suite 301 San Diego, CA 92123 Printing History Edition 4 August 2004 2 File name: hp 12c_user's guide_English_HDPMBF12E44 Printered Date: 2005/7/29 Page: 2 of 209 Dimension: 14.8 cm x 21 cm Introduction About This Handbook This hp 12c user's guide is intended to help you get the most out of your investment in your hp 12c Programmable Financial Calculator. Although the excitement of acquiring this powerful...
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...NIKE INC. CASE 14 Philip Chen, Choco Huang, Ariel Chou, Matt Krieger In this report we analyzed Cohen’s approach in calculating WACC. After observing how Cohen derived his figures we came up with our own WACC, terminal value, and EPS. Cohen broke down his calculations into five parts 1) Single or Multiple Costs of Capital 2) Proportion of capital from debt and equity 3) Cost of Debt 4) Cost of Equity 5) WACC In part one; we disagreed with Cohen where he decided to value the company as a whole instead of valuing each division separately. Since Nike is a multidivisional firm Cohen should of aggregated the values of the individual divisions and calculate a different cost of capital for each one. Since the exhibit 1 and 3 provide a consolidated income statement and balance sheet it is difficult to segregate the divisions. Therefore when we did our own calculations we used Cohen’s assumption of a single cost of capital. In part two Cohen allocated the weight of debt and equity based on book value. This method is incorrect because the allocation should be based on market value. The table below is our calculation of capital allocation. Table 1.1 | Price: Exhibit 4 | shares outstanding | Total | % of Capital | Debt | 95.60 | 271.50 | 25,955.40 | 69.43% | | | | | | | Price: Exhibit 2 | shares outstanding | Total | % of Capital | Equity | 42.09 | 271.50 | 11,427.44 | 30.57% | | | | 37,382.84 | 100.00% | Part 3 is the cost...
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...examples. An extensive list of topics is given. Each link leads to an excellent lecture. | General | DVU * | Math.com Homework Help Algebra < http://www.math.com/homeworkhelp/Algebra.html > [4/8/2013] Extensive list of algebra topics, all covered in user-friendly lectures. | General | DVU * | Annuity Calculator | Annuities-Financial-Planning.com < http://www.annuities-financial-planning.com/annuity-calculator.html > [4/8/2013] Various calculators and advice on annuities, with emphasis on retirement planning. | General | DVU * | Polynomials: Definitions / Evaluation < http://www.purplemath.com/modules/polydefs.htm > [4/8/2013] Definitions of polynomials and like terms. Very good summary. | General | DVU * | Investopedia.com - Investing and Finance Calculators < http://www.investopedia.com/calculator/ > [4/8/2013] Comprehensive list of online calculators. | General | DVU * | Calculating The Present And Future Value Of Annuities < http://www.investopedia.com/articles/03/101503.asp > [4/8/2013] Online calculators with good explanations and examples of various annuity calculations. | General | DVU *...
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...price. Along with good and bad news relating to the operations of a company, any sort of distribution that is made to investors will also affect stock price. These distributions can include cash dividends, stock dividendsand stock splits. When distributions are made, the adjusted closing price calculations are quite simple. For cash dividends, the value of the dividend is deducted from the last closing sale price of the stock. For example, let's assume that the closing price for one share of XYZ Corp. is $20 on Thursday. After close on Thursday, XYZ Corp. announces a dividend distribution of $1.50 per share. The adjusted closing price for the stock would then be $18.50 ($20-$1.50). If XYZ Corp. announces a 2:1 stock dividend instead of a cash dividend, the adjusted closing price calculation will change. A 2:1 stock dividend means that for every share an investor owns, he or she will receive two more shares. In this case, the adjusted closing price calculation will be $20*(1/(2+1)). This will give you a price of $6.67, rounded to the nearest penny. If XYZ Corp. announces a 2:1 stock split, investors will receive an extra share for every share they already own. This time the calculation will be $20*(1/(1x2)), resulting in an adjusted closing price of $10. We have...
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...you know if you can afford or it not. In order to refinance your loan, you’ll start it all over again then compare the results. The recommended course of action are as follows paying the current loan balance at the interest rate over 20 years there would be a difference left over. And it’s less reasonable to refinance if you’re paying more per month to reduce the cost. Paying for 25 years and if you choose to refinance the loan the more money you will have to pay each month. So the best option in this case is to go ahead and pay the loan within 20 years without financing. Paying additional to go ahead and pay the loan off quicker. The formula used was C = (P(r/12) / (1-(1+[r/12])^(-m). To avoid any incorrect calculations I referred to my financial calculator and performed a few steps and came up with the current loan balanced of 125,911.86 at 5.6% over 20 years, the payment would be 887.13 leaving a difference of 106.38. It would be unreasonable to refinance and pay an extra 106.38 per month to reduce the cost per month. Making payments of 780.75 for 25 years, if loan was refinanced at 2,000.00 then the monthly payments per month would be 524.63 and 6, 295.59 per...
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...About 50,300,000 results (0.22 seconds) Sponsored Shop for accounting calculator on Google Texas Instruments B... $34.99 Staples HP 10bII+ Financial Cal... $29.99 HP Direct Texas Instruments B... $39.99 toysrus.com Texas Instruments B... $42.14 Walmart Hewlett‑Pack... 12C Financia... $85.99 Overstock.... Shop by brand:HP Texas Instruments Search Results Online Accounting Calculator - Equations, Formulas, and Ratios www.a-systems.net/calculator/10+ items – Accounting Calculator. Calculate accounting ratios and ... Name Equation Asset Turnover Net Sales / Total Assets Average Collection Period Accounts Receivable / (Annual Credit Sales / 365) Net Profit, Net Income, Income - Gross Profit Margin - Receivables Turnover Ratio Accounting Calculator - Android Apps on Google Play https://play.google.com/store/apps/details?id=jp.gr...hl... 69 votes - Free - Android Aug 27, 2012 – This application is an accounting calculator with many functions. *Calculating due to 12 figures *Digit grouping separators *Four arithmetic ... Images for accounting calculator - Report images Accounting - TCalc online financial calculators - TimeValue Software tcalc.timevalue.com/accounting.aspxSuite of financial calculators for the CPA industry. Add these calculators to your existing cpa accounting website. Free accounting online line calculator calculator.utilstudio.com/Free accounting online line calculator. ... Free accounting online line calculator...
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...kitchen because they can provide important information to the kitchen. Before using the BI tool, the California Pizza kitchen used the old system to manage the financial statements, it made a lot of trouble in data organizing and calculating. After using that tools, it provides the fast and accurate way in data organizing and data calculations. It can make the communication more efficiently and effectively. 3． It is impossible to have 100 percent accurate and complete information because it will cost too much money here. The perfect always means expensive. If the company wants to get the accurate and complete information, it will let them have more cost here. It has more than 70 restaurants throughout the US right now, it may also have the human mistakes in collecting data. Therefore, it is impossible for that company had no error in obtaining that information. 4． For Ben & Jerry, the BI helps them to improve the quality of product. It increases the popularity of the company and let more people know they have the highest quality ice-cream. For the California Pizza Kitchen, using BI is good for them to manage and calculate data. It helps them to make financial statements complete and accurate. For the Noodles & Company, using BI helps the manager to communicate with all the restaurants in their financial statements with the marketing, sales and any...
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...hp 12c financial calculator user's guide H Edition 4 HP Part Number 0012C-90001 File name: hp 12c_user's guide_English_HDPMBF12E44 Page: 1 of 209 Printed Date: 2005/7/29 Dimension: 14.8 cm x 21 cm Notice REGISTER YOUR PRODUCT AT: www.register.hp.com THIS MANUAL AND ANY EXAMPLES CONTAINED HEREIN ARE PROVIDED “AS IS” AND ARE SUBJECT TO CHANGE WITHOUT NOTICE. HEWLETT-PACKARD COMPANY MAKES NO WARRANTY OF ANY KIND WITH REGARD TO THIS MANUAL, INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY, NON-INFRINGEMENT AND FITNESS FOR A PARTICULAR PURPOSE. HEWLETT-PACKARD CO. SHALL NOT BE LIABLE FOR ANY ERRORS OR FOR INCIDENTAL OR CONSEQUENTIAL DAMAGES IN CONNECTION WITH THE FURNISHING, PERFORMANCE, OR USE OF THIS MANUAL OR THE EXAMPLES CONTAINED HEREIN. © Copyright 1981, 2004 Hewlett-Packard Development Company, L.P. Reproduction, adaptation, or translation of this manual is prohibited without prior written permission of Hewlett-Packard Company, except as allowed under the copyright laws. Hewlett-Packard Company 4995 Murphy Canyon Rd, Suite 301 San Diego, CA 92123 Printing History Edition 4 August 2004 2 File name: hp 12c_user's guide_English_HDPMBF12E44 Printered Date: 2005/7/29 Page: 2 of 209 Dimension: 14.8 cm x 21 cm I ntroduction A bout This Handbook This hp 12c user's guide is intended to help you get the most out of your investment in your hp 12c Programmable Financial Calculator. Although the ...
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...Financial concepts are greatly important when determine which would be the best method to use for the firm or personal use. Some financial concepts are time value of money, risk and return, and interest rates. The activity of the assignment is to determine which options are best for the individual if the individual were given three alternatives of his or her inheritance; taking the $5,000 now, $1,000 for the next eight years, or taking a $12,000 at the end of the eight years. Assume that the individual can earn 11 percent interest annually. First, determine which what formulas will need to apply based on the way cash is being received. Perform the necessary calculations and determine which inheritance alternative would be best and why? Second, would he or she decision be different if he or she can earn interest at 12 percent? Without a proper calculation of the funds, decisions can be misconception. Receiving $5,000 cash now sound great and then invest for eight eights with 11 percent interest for the eight years. On the other hand, receiving $1,000 for the next eight years seems to be a little long and the amount is not that amazing but that $1,000 can be as large by the end of the eight years because the interest received increase each year—higher deposit at year two. For example, at year one, he or she invests $1,000 times that by the 11 percents interest rate will equal to $1,110 for the first year. For the second years, the interest will be calculate base...
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