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lubasha [3.4K]
3 years ago
15

Assume the company is considering investing in a new machine that will increase its fixed costs by $42,500 per year and decrease

its variable costs by $10 per unit. Prepare a forecasted contribution margin income statement for 2020 assuming the company purchases this machine.
Business
1 answer:
Semenov [28]3 years ago
8 0

Answer:

The company should purchase the machine.

Explanation:

Note: The complete question is attached below

Forecasted contribution margin income statement

For the Year Ended December 31

Particulars                                       Amount$

Sales                                                2,440,000

Variable cost(10,000*185(195-10))  <u>1,850,000</u>

Contribution margin                        590,000

Fixed cost (327,600+42,500)         <u>370,100</u>

Income                                              <u>$219,900</u>

Because the income increase by $57,500 due to the pruchase, the company should purchase the machine

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The range of S is 74 while that of P is 37 across the two states. What is the hedge ratio of the put
lorasvet [3.4K]

This question is incomplete, the complete question is;

We will derive a two-state put option value in this problem.

Data: S₀ = 106; X = 112; 1 + r = 1.12. The two possibilities for ST are 149 and 75.

The range of S is 74 while that of P is 37 across the two states. What is the hedge ratio of the put

Answer: the hedge ratio of the put H = - 1/2 ≈ - 0.5

Explanation:

Given that;

S₀ = 106, X = 112, 1 + r = 1.12

Us₀ = 149 ⇒ Pu = 0

ds₀ = 75 ⇒ Pd = 37

To find the Hedge ratio using the expression

H = Pu - Pd /Us₀ - ds₀

so we substitute

H = 0 - 37 / 149 - 75

H = - 37/ 74

H = - 1/2 ≈ - 0.5

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