Task1. This year Amy purchased $2,200 of equipment for employ in her business. However, the machine was damaged in the traffic accident while Amy was transporting the equipment to her business. Note that because Amy didn’t place the equipment into service throughout the year, she doesn’t claim any depreciation expense for the equipment.
After the accident, Amy could not replace the equipment so she had the equipment repaired for $2,800. What amount can Amy deduct for the loss of equipment?
Task2. After discussing the concept of the delta-neutral portfolio, Washington finds out that he needs to further describe the concept of delta. Washington draws the value of an option as a function of the underlying stock price. Demonstrate such a diagram, and indicate how delta is interpreted. Delta is the:
a. Slope in the option price diagram.
b. Curvature of the option price graph.
c. Level in the option price diagram.
Task3. Critically reflect on significance of capital budgeting. Why is this heated subject in many boardrooms? How does capital budgeting promote the financial health of organization?
Task4. Pierce Furnishings generated $2 million in sales throughout 2011, and its year-end total assets were $1.1 million. As well, at year-end 2011, current liabilities were $500,000, comprising $200,000 of notes payable, $200,000 of accounts payable, and $100,000 of accrued liabilities. Looking ahead to 2012, the company estimates that its assets should rise by $0.55 for every $1.00 rise in sales. Pierce's profit margin is 3%, and its retention ratio is 45%. How large of a sales raise can the company achieve without having to increase funds externally?