Answer:
To create the collar, the customer would: <u>buy 1 PHLX 59 SF Call and sell 1 PHLX 61 SF Call.</u>
Explanation:
The meaning of a "collar" is that a put is bought at a strike price that is less than the price of the underlying instrument (this implies that a floor has been put on the price of the instrument); and that a call is disposed at a strike price which is higher than the price of the underlying instrument (this indicates that a ceiling above which the instrument will be called away has been created).
When a collar is put on the price, it indicates that the customer is majorly giving a guarantee for the underlying instrument's minimum and maximum price.
This should make the net cost of the collar to be close to zero due to the fact that the two contracts are "out the money" and also because the premium paid to buy the put is offset by the premium received when the call was sold.
Therefore, since customer in the question wishes to place a collar on the position using PHLX SF FLEX options, he would <u>buy 1 PHLX 59 SF Call and sell 1 PHLX 61 SF Call</u> to create the collar.
Answer:
Raw Materials transferred to production during 2017 $1,466,000
Explanation:
The computation of the raw material transferred to production is given below:
Opening raw material 2016 $80,000
Add : Purchase of Raw material $1,450,000
Less Closing Stock raw material 2017 $64,000
Raw Materials transferred to production during 2017 $1,466,000
Hence, the same should be relevant
Answer:
A. Deadweight loss = 125 units.
B. Deadweight loss = 25 units.
Explanation:
In a free market and completely efficient economy, the consumer surplus equals the producer surplus. Both benefits of free trade. When consumers o producers have a minor surplus, necessarily implies a loss on eficiency, usually caused by government regulations like taxes or price ceilings.
The amount of welfare lost is measure by the difference between consumer and producer surplus.
In the first case:
|Consumer surplus - producer surplus| = 25 units
|250- 125| = 125 units
And in the second case:
|180- 155| = 25 units
Answer:
Present Value 5,715,331.32
We are going to accept the project only if the initial investment is at 5,715,331 or below in order to achieve the return to support the cost of capital structure of the company
Accepting a project with a higher cost will not generate enought cashflow to sustain the patyment of debt and the return expected from the stockholders therefore, will generate a economic result and investor will leave the company for other which can sustain their desired return.
Explanation:
We are going to discount the yearly cash-flow at the given rate of 12.50%
then, the terminal value which is the present value of the future period will also be discounted at this rate.
The sum of all this will be the present value of the firm.
![\left[\begin{array}{ccc}$Year&$Cash Flow&$Discounted\\1&575000&511111.11\\2&625000&493827.16\\3&650000&456515.77\\4&725000&452613.93\\5&850000&471689.61\\$terminal&6000000&3329573.74\\Present&Value&5715331.32\\\end{array}\right]](https://tex.z-dn.net/?f=%5Cleft%5B%5Cbegin%7Barray%7D%7Bccc%7D%24Year%26%24Cash%20Flow%26%24Discounted%5C%5C1%26575000%26511111.11%5C%5C2%26625000%26493827.16%5C%5C3%26650000%26456515.77%5C%5C4%26725000%26452613.93%5C%5C5%26850000%26471689.61%5C%5C%24terminal%266000000%263329573.74%5C%5CPresent%26Value%265715331.32%5C%5C%5Cend%7Barray%7D%5Cright%5D)
The formula we use the present value of a lump sum:
We are going to accept the project only if the initial investment is at 5,715,331 or below in order to achieve the return to support the cost of capital estructure of the company
Answer:
the issue price is $88 per share
Explanation:
The computation of the issue price is shown below:
= (Common stock + paid in capital) ÷ (Number of common shares issued)
= ($3,600,000 + $36,000,000) ÷ 450,000 shares
= $39,600,000 ÷ 450,000 shares
= $88 per share
Hence, the issue price is $88 per share
