Answer:
$1.92 million
Explanation:
The value of the subsidy per year = $12,000,000 x 3% = $360,000
Now we have to find the present value of the cash flows using an excel spreadsheet and the net present value function =NPV(discount rate,series of cash flows)
discount rate = 10% (market rate)
cash flows = 8 cash flows of 360,000 each
=NPV(10%,360000,360000,360000,360000,360000,360000,360000,360000) = $1,920,573 ≈ $1.92 million
Answer:
Logan Horse Ranch
The most accurate is:
e. None of the above are correct
Explanation:
Logan's payment to his brother, Luke, of $500 per hour, is not a reasonable business expense that can be deductible. Surely, $500 per hour is not a going rate for cleaning the horse stalls per hour. With Lucy doing grocery shopping for Logan, it does not resonate like an ordinary and necessary expense for the business. Therefore, options A to D are not correct. This leaves only option E as the most accurate.
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Answer:
$400
Explanation:
From the question, there is a butterfly spread when a trader buys 100 options with strike prices $60 and $70 and sells 200 options with strike price $65.
The maximum gain is the point where both the stock price and the middle strike price are equal, i.e. equal to $65. At that point, the options payoffs are respectively $500, 0, and 0. By implication, the total payoff is $500.
The set up cost of the butterfly spread can be calculated as follows:
Setup cost = ($11×100) + ($18×100) – ($14×200)
= 1,100 + 1,800 – 2,800
Setup cost = $100
Net gain = Options payoffs – Setup cost = $500 - $100 = $400
Therefore, the maximum net gain (after the cost of the options is taken into account) is $400.
