Consider a stock priced at $30 with a standard deviation of 0.3. The risk-free rate is 0.05. There are put and call options avai
1 answer:
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Answer: $80 million per year for 25 years
Explanation:
The option you should choose is one that will guarantee you the highest present value.
This means that you need to discount the annual payment of $80 million per year for 25 years to find the present value. As you did not include a rate, we shall assume a rate of 8% for reference purposes.
The annual payment is an annuity so the present value can be calculated by:
Present value of annuity = Annuity payment * Present value interest factor, rate, no. of years
= 80,000,000 * Present value interest factor, 8%, 25 years
= 80,000,000 * 10.6748
= $853,984,000
<em>The present value of the annual payment is more than the present value of the $850 million received today so the Annual payment should be taken. </em>
Facility expenses in the flexible budget comes out to be $24,260.
<h3>What is flexible budged?</h3>A flexible budget is one that is based on various sales volumes. For each projected level of production, the static budget is adjusted by a flexible budget. Due to this flexibility, management is able to predict how the budgeted figures will change as sales volume changes.
Calculation for the facility expenses in the flexible budget for December:
The table of the data used in budgeting: Fixed Element per Month Variable element per tenant-day Revenue is in attachment-
Facility expenses in the flexible budget = Variable + Fixed
= (3650*4.40) + 8200
= 16,060 + 8200
= 24,260
The wages and salaries in the planning budget for December would be closest to $24,260.
To know more about the flexible budget, here
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