You are among the OTC market makers in the stock of Bio-Engineering, Inc.and quote a bid of 102.25 and an ask of 102.5. Suppose
1 answer:
Answer:
Ans.
a) You earn $1,000 for selling 4,000 shares
b) The value of your final inventory is $615,000
Explanation:
Hi, what you earn is the spread, which is the difference between the bid and ask quote, that is:
This means that you earn $0.25 per share you sell, therefore your earnings are:
Now, for your final inventory (its value) all you have to do is to multiply your remaining inventory (6,000 shares, because you bought 10,000 and sold 4,000) by the ask quote.
Best of luck.
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Answer:
E=-4.0746
Explanation:
Using the midpoint method, Lauren's income elasticity of demand for new outfits is determined by the change in income multiplied by the average number of outfits, divided by the change in the number of outfits multiplied by the average income:
Her income elasticity of demand for new outfits is -4.0746.
Answer: B. There are two IRRs so you cannot use the IRR as a criterion for accepting the opportunity.
Explanation:
The Internal Rate of Return can be useful in capital budgeting to enable a company know if an investment will be profitable. It is defined as the discount rate that causes the Net Present Value(NPV) to be zero. If the IRR is greater than the required return then the project should be accepted as it will have a profitable NPV.
IRR has some problems however and one of them is reflected here. There can sometimes be two IRRs and when this happens, using IRR as a viability measure cannot be done because a single rate is needed for comparison with the required return.
Answer:
the breakeven cash inflow for the project is $131474
Explanation:
given data
cost of capital = 10 percent
initial investment = $1,000,000
useful life = 15 year
to find out
the breakeven cash inflow for the project
solution
first we consider here annual cash inflows that is = x
now break even point is the one at which the net present value of the project = 0
so we can say that here
Present value of cash inflows - Present value of cash outflows = 0 .................1
here we know Present value of cash inflows = x × PVAF ( 10%,15 years)
Present value of cash inflows = x × 7.6060
put value in equation 1 we get
x × 7.6060 - $1,000,000 = 0
solve and we get x
x =
x = $131474
so the breakeven cash inflow for the project is $131474