Answer:
d. If Cazden's stock price rose by $5, the exercise value of the options with $25 strike price would also increase by $5.
Explanation:
A call option confers a right, not an obligation upon the call buyer to buy a security at a pre determined price, known as exercise price or strike price at a future date.
A call buyer would exercise his right only in the scenarios wherein the strike price is lesser than the current market price on maturity.
Profit of a call buyer is given by = CMP as on expiry - Exercise/Strike price - Option premium paid
wherein CMP= Current Market Price
A call option is "in the money" when it's strike price is less than it's current market price. In the given case, it means if the CMP today represents CMP upon expiry, call buyer would exercise his right and his gain would be $5 i.e $30 - $25.
Since the $25 exercise option is "in the money", an increase in stock price by $5 will also increase the strike price by $5.
<span>A Cartesian coordinate system is a coordinate system that specifies each point uniquely in a plane by a pair of numerical coordinates, which are the signed distances to the point from two fixed perpendicular directed lines, measured in the same unit of length. This can be used to build a new line through mountains.</span>
The company's degree of operating leverage is 1.29.
The degree of operating leverage(DOL) quantifies how much a company's operating income fluctuates in response to a change in sales.
The DOL ratio helps analysts determine the impact of changes in sales on company earnings.
A company with high operating leverage has a high proportion of fixed costs, which means that a large increase in sales can result in large changes in profits.
Using the formula for degree of operating leverage we get:
Degree of Operating Leverage = Contribution Margin/Operating Income
= $85200/$66200
= 1.29
Hence, The company's degree of operating leverage is 1.29.
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Timmons Corporation purchases office supplies for $350 cash. Debit Supplies $350, credit Cash $350.
A legal entity is an organization (usually a group of people or a legal entity) authorized by the State to act as a single entity and legally recognized as such for a specific purpose. Early incorporated entities were established by charter. Most jurisdictions now allow the formation of new companies through registration.
A corporation is a business entity owned by shareholders who elect a board of directors to oversee the activities of the organization. A company is responsible for its actions and finances, but its shareholders are not.
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