Which statements about the offer are true? Check all that apply.

You are attempting to value a call option with an exercise price of $109 and one year to expiration. The underlying stock pays n

Ivenika [448]

Answer:

The value of the call option today is $14.29

Explanation:

The two-state stock pricing model is one that prices are based on the assumption that there is no arbitrage profit opportunity as well as the fact that the call option's value will be the present value(PV) of the expected future winnings for long call.

Now, value of the call option if the prices go up will be;

142 - 109 = $32

While if the prices go down, it will be;

76 - 109 = -$33

The call option in this case can only be utilized when the market value exceeds the exercise price.

Therefore, the expected winnings value after one year will be;

Value after one year = (32 × 0.5) + (0 × 0.5)

Value after one year = $16

We used 0 in the multiplication because the call wouldn't be utilized for when the prices go down.

one year from now the long call can be expected to earn $16 .

Thus, today the present value of this amount will be the price of the call option if we take into cognizance that here will be no arbitrage profit opportunity.

With risk-free rate of interest is 12%, we have;

PV = 16/1.12 = $14.29

3 0

3 years ago

Chang and Smith Tours has the following balance sheets: 2018 2019 Assets Cash $209 $197 Accounts Receivable 684 726 Inventory 91

rusak2 [61]

Answer:

Chang and Smith Tours

The amount of net working capital for 2019 is:

$828.

Explanation:

a) Data and Calculations:

Chang and Smith Tours

Balance sheets: 2018 2019

Assets

Cash $209 $197

Accounts Receivable 684 726

Inventory 918 1,023

Net Fixed Assets 2,014 1,944

Total Assets $3,825 $3,890

Liabilities and Equity

Accounts Payable $748 $818

Notes Payable 306 300

Long-Term Debt 1,647 1,724

Stockholders' Equity 1,118 1,048

Total Liabilities and Equity $3,819 $3,890

Working capital:

Current assets:

Cash $209 $197

Accounts Receivable 684 726

Inventory 918 1,023

Less current liabilities

Accounts Payable $748 $818

Notes Payable 306 300

Net working capital $757 $828

b) The net working capital is the difference between current assets and current liabilities.

8 0

3 years ago

What is LVN Corporation's direct labor efficiency variance? (Round any intermediary calculations to the nearest cent and your

Leokris [45]

<u>Complete Question:</u>

LVN Corporation's direct labor costs and related information for the month of June were as follows:

500 Actual total direct labor-hours

1000 Standard total direct labor-hours

Total direct labor cost $16,500

Unfavorable direct labor rate (rate) variance $600

What is LVN Corporation's direct labor efficiency variance?

A. $16,500 unfavorable

B. $7950 unfavorable

C. $7950 favorable

D. $16,500 favorable

Answer:

$7,950 Unfavorable

Explanation:

As we know that:

"Labor Efficiency Variance = (Actual Labor Hours Worked for Actual Production − Standard Hours for Actual Production) * Standard Rate"

If we consider the parenthesis elements in the formula, we can decide whether the variance is favorable or adverse. If the actual labor hours worked are more than the budget (standard hours for actual production) then the variance (difference) is adverse because greater the hours worked for same level of activity (Production Units) the greater is the labor cost. Hence the variance would be adverse and vice versa.

Here

Actual Hours Worked for actual production are 1,000 Hours

Actual total labor cost is $16,500

Standard Hours Worked for actual production are 500 Hours

Standard rate per hour is $15.9 per Hour <u>(Step 1)</u>

By putting values, we have:

Direct Labor Efficiency Variance = (1000 Hrs - 500 Hrs) * $15.9 per hour

= (1000 - 500) * $15.9 per share

= $7,950 Unfavorable

<h2><u>Step1: Find Standard Labor Rate</u></h2>

We can find the standard labor rate using the following labor rate variance formula:

Labor Rate Variance = (Standard Rate per Hour * Actual Hours Worked) − (Actual Rate per Hour * Actual Hours Worked)

Here

(Actual Rate per Hour * Actual Hours Worked) is total labor cost which is $16,500

Actual Hours Worked is 1000 Hours

Labor Rate Variance is ($600)

By putting values, we have:

($600) = (1000 Hours * Standard Labor Rate) - $16,500

($600) + $16,500 = 1000 Hours * Standard Labor Rate

$15,900 = 1000 Hours * Standard Labor Rate

Standard Labor Rate = $15,900 / 1000 Hours = $15.9 per hour

7 0

3 years ago

Exercise 118 The information shown below is taken from the accounts of Waverly Corporation for the year ended December 31, 2017.

devlian [24]

Answer:

Explanation:

The preparation of the Cash Flows from Operating Activities—Indirect Method is shown below:

Cash flow from Operating activities - Indirect method

Net income $314,000

Adjustment made:

Add : Depreciation expense $55,000

Add: Amortization of patent $12,000

Less: Gain on sale of building -$15,000

Add: Loss on sale of land $5,000

Add: Decrease in accounts receivable $23,000

Add: Increase in short-term notes payable $8,000

Add: Decrease in inventory $27,000

Less: Decrease in accounts payable -15,000

Total of Adjustments $100,000

Net Cash flow from Operating activities $414,000

Cash flow from Investing activities

Sale of building $85,000

Less: Purchase of equipment -$185,000

Sale of land $40,000

Less: Purchase of delivery van -$33,000

Net Cash flow from Investing activities -$93,000

Cash flow from Financing activities

Proceeds from issuance of common stock $103,000

Less: Payment of cash dividends -$24,000

Less: Payment of mortgage -$75,000

Net Cash flow from Financing activities $4,000

Net Cash flow from Operating activities $414,000

Net Cash flow from Investing activities -$93,000

Net Cash flow from Financing activities $4,000

Net increase (decrease) in cash for the year is $325,000

Add: Cash at beginning of year $205,000

Ending cash balance $530,000

5 0

3 years ago

Both the chart of accounts and the ledger __________. A. list the account names and numbers of the business B. provide the bala

Marizza181 [45]

Answer: (A) List the account names and numbers of the business.

Explanation:

The chart of the account is basically a listing of name of an account in which the company identified availability for the recording transaction in the general ledger. The company has high flexibility for tailor its both chart of account and ledger for its need and including accounts according to its particular needs.

The charts of the accounts has large and complex as company itself. The organization chart properly serve the outline for the accounting for the chart of account and the number of business.

7 0

4 years ago