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1) Compute the present price per share (P0) for Olson Corporation, provided the listed information. The data pertain to year just ended.

Sales=10,000units
Sales price per unit=$10
Variable cost per unit=$5
Fixed cost=$10,000
Long-term debt outstanding=$15,000
kd on all long-term debt=5%
Tax rate=30%
Common stock shares outstanding=10,000shares
Beta=1.5
kRF=5%
kM=9%
Dividend payout ratio=40%
Growth rate in earnings and dividends=7%

2) The investor is committed to buying 100 shares of world port management stock in 6 months. She is worried that stock price will rise appreciably over the next six months. Stock is at $45 and she purchases a six month call with a strike of $50. At expiration the stock is at $54. Determine the gain or loss on whole stock option portfolio?

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M914550

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