BUSINESS COLLEGE

A put and a call have the following terms: Call: strike price $50 expiration date six months Put: strike price $50 expiration date six months The price of the stock is currently $55. The price of the call and put are, respectively, $9 and $1. What will be the profit from buying the call or buying the put if, after six months, the price of the stock is $40, $50, or $60?

Answers

Answer 1

Answer:

Answer:

* Profit from buying the call with strike price of $50 after six months if:

- The stock price is $40: -$9

- The stock price is $50: -$9

- The stock price is $60: $1

* Profit from buying the put with strike price of $50 after six months if:

- The stock price is $40: $9

- The stock price is $50: -$1

- The stock price is $60: -$1

Explanation:

It is useful to recall that the call's buyer has the right but not the obligation to buy an underlying asset at strike price at expiration date; while the put's buyer has the right but not the obligation to sell an underlying asset at strike price at expiration date.

Explanation for each circumstances:

*Profit from buying the call with strike price of $50 after six months if:

- The stock price is $40: Do not exercise the call option as investor can buy from the market at $40 instead at the strike price of $50. Thus, investor will recognize a loss of $9 from buying the option.

- The stock price is $50: Market price is equal to strike price, investor will recognize a loss of $9 from buying the option.

- The stock price is $60: $1. Investor buy at strike price $50, sell in the market for $60 to get profit of $10, minus option price of $9, net gain is $1.

* Profit from buying the put with strike price of $50 after six months if:

- The stock price is $40: Investor buy from market at $40, sell through put option at $50, recognized the profit of $10. Net gain will be determined by further deducting of option price $1, to come at $9.

- The stock price is $50: Market price is equal to strike price, investor will recognize a loss of $1 from buying the option.

- The stock price is $60: Investor ignore the option as it can sell at market price of $60 instead of strike price $50. Net loss is option price $1.

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The following income statement is provided for Vargas, Inc. Sales revenue (2,500 units × $60 per unit) $ 150,000 Cost of goods sold (variable; 2,500 units × $20 per unit) (50,000 ) Cost of goods sold (fixed) (8,000 ) Gross margin 92,000 Administrative salaries (42,000 ) Depreciation (10,000 ) Supplies (2,500 units × $4 per unit) (10,000 ) Net income $ 30,000 What is this company's magnitude of operating leverage?

Answers

Answer:

The correct answer is 3.

Explanation:

According to the scenario, the computation of the given data are as follows:

Variable cost = Cost of goods sold (variable) + Supplies

= $50,000 + $10,000 = $60,000

Fixed cost = Cost of goods sold (fixed) + Administrative salaries + Depreciation

= $8,000 + $42,000 +$10,000 = $60,000

So, we can calculate the operating leverage by using following formula:

Operating leverage = Contribution margin ÷ Net operating income

Where, Contribution Margin = Sales revenue - Variable cost

= $150,000 - $60,000 = $90,000

And Net operating income = Contribution Margin - Fixed Cost

= $90,000 - $60,000 = $30,000

By putting the value, we get

Operating leverage = $90,000 ÷ $30,000

= 3

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Answers

I believe the answer would be $110,000; $50,000

Assume a Cobb-Douglas production function of the form: q equals 10 Upper L Superscript 0.97 Baseline Upper K Superscript 0.18. What type of returns to scaleLOADING... does this production function exhibit? In this instance, returns to scale equal nothing. (Enter a numeric response using a real number rounded to two decimal places.) This production function exhibits A. decreasing returns to scale. B. constant returns to scale. C. initially increasing but then constant returns to scale. D. initially constant but then increasing returns to scale. E. increasing returns to scale.

Answers

Answer:

Returns to scale = 1.15

Increasing returns to scale.

Explanation:

Cobb-Douglas production function of the form:

$q=10(L)^(0.97)(K)^(0.18)$

Here, we are using a simple rule of factors to find the returns to scale:

$q=10(tL)^(0.97)(tK)^(0.18)$

$q=10(t)^(0.97+0.18) (L)^(0.97)(K)^(0.18)$

$q=10(t)^(1.15) (L)^(0.97)(K)^(0.18)$

Hence,

By adding up the powers of L and K, we can get the returns to scale.

Returns to scale = 1.15

Suppose, the power of L be 'a' and the power of K is 'b',

if a + b = 1, then it exhibits constant returns to scale

if a + b > 1, then it exhibits increasing returns to scale

if a + b < 1, then it exhibits decreasing returns to scale.

In our case,

a + b = 1.15 which is greater than 1, so this production function exhibits increasing returns to scale.

What kind of good is It? Determine whether each of the following goods is a private good, a public good, a common resource, or a club good. Private Good Public Good Common Resource Club Good
A cabana along beach that is open to the public
A new sUV that you use to drive your friends around town
A large, beautiful fountain in a town square

Answers

Answer: Please refer to Explanation

Explanation:

Private Goods are those goods that exclusive and excludable. This means that people can be prevented from using it by the owners if the people who want to use it don't pay for it or reach an agreement with the owner.

A Public Good on the other hand is provided to every member of the public for use. They are non-excludable meaning that people can use them without having to pay a fee.

Common Resources are a mixture of both man-made and natural resources. As such, even though it is open to the public, it's use can be restricted by certain requirements such as payment.

Classifying the above,

A. Common Resource.

The Cabana is a common Resource because it is open to all members of the public and is a man-made resource on the beach which is a public good. However, one must pay to use it as well.

B. Private Good.

The SUV is your own personal property and as such is a private good whose use you can restrict from people making it exclusive and excludable.

C. Public Good.

The fountain is for everyone and no one has more right to it than others. Neither do they have to pay to view it. This makes it a Public good.

Rouge Company’s $250,000 net income for the quarter ended September 30 included the following after-tax items:A $20,000 cumulative effect loss resulting from a change in inventory valuation method made on September 1.$0 of the $60,000 annual property taxes paid on February 1.For the quarter ended September 30, the amount of net income that Rouge should report is:_______.a. $235,000.b. $250,000.c. $255,000.d. $270,000.

Answers

Answer:

c. $255,000

Explanation:

Rouge should report the following income for this quarter = $250,000 (net income) + $20,000 (cumulative effect loss) - $15,000 (25% of annual property taxes) = $255,000

Cumulative effects on inventory valuation occur when overstate or understate your inventory levels, which directly affects cost of goods sold and overall profits.

Peterson Company billed its customers a total of $840,000 for the month of November. The total includes a 5% state sales tax.(a) Determine the proper amount of revenue to report for the month.
(b) Prepare the general journal entry to record the revenue and related liabilities for the month.