Question 1
Assignment #5: Derivative Security Analysis Exercise 1. The common stock of the Island Angler Corporation is currently trading at a price of $31 per share. Both a put and a call option are available for the stock, each having an exercise price of $30 and an expiration date in exactly six months. The current market prices for the put and call are $1.50 and $3.09, respectively. The risk-free holding period return for the next six months is 2 percent, which corresponds to a 4 percent annual rate. a. For each possible stock price in the following sequence, calculate the expiration date payoffs (net of the initial purchase price) for the following positions: (1) buy one Island Angler call option, and (2) short on Island Angler call option: 10, 15, 20, 25, 30, 35, 40, 45, 50 Draw a graph of these payoff relationships, using net profit on the vertical axis and potential expiration date stock price on the horizontal axis. Be sure to specfy the prices at which these respective positions will break even (i.e., produce a net profit of zero). b. Using the same potential stock prices as in Part a, calculate the expiration date payoffs and profits (net of the initial purchase price) for the following positions: (1) buy one Island Angler put option, and (2) short one Island Angler put option. Draw a graph of these relationships, labeling the prices at which these investments will break even. c. Determine whether the $1.59 difference in the market prices between the call and put options is consistent with the put-call parity relationship for European-style contracts. 2. You are a sugar dealer anticipating the purchase of 250,000 pounds of sugar in three months. You are concerned that the price of sugar will rise, so you take a long position in sugar futures. Each contract covers 112,000 pounds, and so, rounding to the nearest contract, you decide to go long in two contracts. The futures price at the time you initiate your hedge is 19.56 cents per pound. Three months later, the actual spot price of sugar turns out to be 20.65 cents per pound and the futures price is 20.85 cents per pound. a. Determine the effective price at which you purchased your sugar. How do you account for the difference in amounts for the spot and hedge positions? b. Describe the nature of the basis risk in the long hedge. 3. Suppose that one day in early April, you observe the following prices on futures contracts maturing in June: 97.65 for Eurodollar and 98.25 for T-Bill. These prices imply three month LIBOR and T-Bill settlement yields of 2.35 percent and 1.75 percent, respectively. You think that over the next quarter the general level of interest rates will rise while the credit spread built into LIBOR will narrow. Demonstrate how you can use a TED (Treasury/Eurodollar) spread, which is a simultaneous long (short) position in a Eurodollar contract and short (long) position in the T-Bill contract, to create a position that will benefit from these views. 4. In Mid-May, there are two outstanding call option contracts available on the stock of Hilltop, Inc. a. Assuming that you form a portfolio consisting of one Call #1 held long and two Calls #2 held short, complete the following table showing your intermediate steps. In calculating net profit, be sure to include the net initial cost of the options. b. Graph the net profit relationship in Part a, using stock price on the horizontal axis. What is (are) the breakeven stock price(s)? What is the point of maximum profit? c. Under what market conditions will this strategy (which is known as a ?call ratio spread?) generally make sense? Does the holder of this position have limited or unlimited liability? 5. Consider the following questions on the pricing of options on the stock of Hatters Yachts. a. A share of Hatteras Yachts sells for $65 and has a standard deviation of 20 percent. The current risk free rate is 4 percent and the stock pays two dividends: (1) $1.00 just prior to the option?s expiration date, which is 91 days from now (exactly one-quarter of a year); and (2) a $1.00 dividend 182 days from now (i.e., exactly one-half year). Calculate the Black-Scholes value for a European-style call option with an exercise price of $60. b. What would be the price of a 91-day European-style put option on Hatteras Yachts having the same exercise price? c. Calculate the change in the call option?s value that would occur if Hatteras? management suddenly decided to suspend dividend payments and this action had no effect on the price of the company?s stock? 6. Describe some of the ethical considerations of a financial manager selling collateralized debt obligations, such as sub-prime loans, to elderly clients.,Youi got my Table?,Here is some additional information about question 4.,Did you get the information that you needed?,I have to submit before 7.00pm today.. If you can then please let me know,If you can do Problem number 1,3,4 and 5 for me before 7.00 i will appreciate it.,Sorry Rachel, I dont need that answer anymore.
Question 2
10/7/2012 AT 3:53PM The user has updated the question : User's response: Winfrey Co.'s March 31 inventory of raw materials is $ 150,0000. Raw materials purchases in April are $ 400,000, and factory payroll cost in April $220,000. Overhead costs incurred in April are: indirect materials, $30,000; indirect labor, $14,000; factory rent, $20,000; factory utilities, $ 12,000; and factory equipment depreciation, $30,000. The predetermined overhead rate is 50% of direct labor cost. Job 306 is sold for $380,000 cash in April. Costs of the three jobs worked on in April follow. Balances on March 31: Direct Materials: Job 306 = $14,000 Job 307 = $18,000 Direct Labor: Job 306= 18,000 Job 307 = 16,000 Applied Overhead: Job 306 = 9,000 Job 307 = 8,000 Costs during April: Direct materials: Job 306 = 100,000 Job 307 = 170,000 Job 308 = 80,000 Direct Labor: Job 306 = 30,000 Job 307 = 56,000 Job 308 = 120,000 Applies Overhead: Job 306, 307, & 308 = =??? Status on April 30: Job 306 = Finished(sold) Job 307 = Finished (unsold) Job 308 = In process Part 1: Determine the total of each production cost incurred for April (Direct labor, direct materials, and applied overhead), and the total cost assigned to each job (including balances from March 31) Part 2: Prepare journal entries for the month of April to record the following a. Materials purchases (on credit), factory payroll (paid in cash), and actual overhead costs including indirect materials and indirect labor. (Factory rent and utilities are paid in cash.) b. Assignment of direct materials, direct labor, and applied overhead costs to the Goods in Process Inventory. c. Transfer of Jobs 306 and 307 to the Finished Goods Inventory d. Cost of goods sold for Job 306. e. Revenue from the sale of Job 306. f. Assignment of any underapplied or overapplied overhead to the Cost of Goods Sold account. (the amount is not material.) Part 3: Prepare a manufacturing statement for April (use a single line presentation for direct materials and show the details of overhead cost)
Question 3
"Could you send me the solutino for this question, when I click on the attachment I get a link broken page, am I doing something wrong when trying to access? Thanks Mike E14-13 Horizontal analysis-income statement Data for Verifine Designs, Inc. follow: Verifine Designs INC- Comparative Income Statement -Years ended December 31, 2011 and 2010 2011 2010 Net sales revenue $428,950 $371,000 Expenses: Cost of goods sold $203,850 $189,350 Selling and general expenses 99,350 93,000 Other expense 6,750 5,000 Total expenses 309,950 287,350 Cash and cash equivalents $119,000 $83,650 Requirements: 1. Prepare a horizontal analysis of the comparative income statement of Verifine Designs Ince. Round percentage changes to the nearest one-tenth percent (three decimal places) 2. Why did 2011 net income increase by a higher percentage than net sales revenue? E14-15 Vertical analysis of a balance sheet- Eta Graphics has the following data: Eta Graphics Inc.- Balance sheet- December 31,2010 Assets Total currents assets $41,870 Property,plant and equipment, net 206,870 Other assets 34,870 Total assets $283,610 Liabilities Total current liabilities $47,870 Long term debt 107,870 Total liabilities 155,740 Stockholder?s Equity Total stockholders equity 127,870 Total liabilities and stockholders equity $283,610 Requirement: 1. Perform a vertical analysis of Eta?s balance sheet. P14-23A Common size statements, analysis of profitability and financial position and comparison with the industry The Russell Department s Stores, Inc. chief executive officer has asked you to compare the company?s profit performance and financial position with the average for the industry. The CEO has given you the company?s income statement and balance sheet as well as the industry average data for retailers. Russell Department Stores Inc. Income Statement compared with Industry Average ?Year ended December 31, 2010 Russell Industry Average Net Sales $777,000 100.0% Cost of goods sold 523,698 65.8 Gross Profit 253,302 34.2 Operating expenses 162,393 19.7 Operating income 90,909 14.5 Other expenses 7,770 0.4 Net Income $83,139 14.1% Russell Department Stores Inc. Balance Sheet compared with Industry Average ?December 31, 2010 Russell Industry Average Current Assets $3330,750 70.9% Fixed Assets, net 123,480 23.6 Intangible assets, net 9,800 0.8 Other assets 25,970 4.7 Total assets $490,000 100.0% Current liabilities $227,360 48.1% Long term liabilities 111,720 16.6 Stockholders equity 150,920 35.3 Total Liabilites $490,000 100.0% Requirements: 1. Prepare a common-size income statement and balance sheet for Russell. The first column of each statement should present Russell?s common-size statement and the second column, the industry averages. 2. For the profitability analysis, compute Russell?s (a) ration of gross profit to net sales, (b0 ration of operating income to net sales, and (c) ratio of net income to net sales. Compare these figures with the industry averages. Is Russells profit performance better or worse than the industry average? 3. For the analysis of financial position, compute Russells (a) ration of current assets to total assets and (b)ratio of stockholders equity to total assets. Compare these ratios with the industry averages. Is Russells financial position better or worse than the industry averages?
Question 4
P11-2A The following are selected transactions of Winsky Company. Winsky prepares financial statements quarterly. Jan. 2 Purchased merchandise on account from Yokum Company, $30,000, terms 2/10, n/30. Feb. 1 Issued a 9%, 2-month, $30,000 note to Yokum in payment of account. Mar. 31 Accrued interest for 2 months on Yokum note. Apr. 1 Paid face value and interest on Yokum note. July 1 Purchased equipment from Korsak Equipment paying $11,000 in cash and signing a 10%, 3-month, $40,000 note. Sept. 30 Accrued interest for 3 months on Korsak note. Oct. 1 Paid face value and interest on Korsak note. Dec. 1 Borrowed $15,000 from the Otago Bank by issuing a 3-month, 8% interest-bearing note with a face value of $15,000. Dec. 31 Recognized interest expense for 1 month on Otago Bank note. Prepare journal entries for the above transactions and events. (For multiple debit/credit entries, list amounts from largest to smallest eg 10, 5, 3, 2.) Date Account / Description Debit Credit Jan. 2 $ $ Feb. 1 $ $ Mar. 31 $ $ Apr. 1 $ $ $ July 1 $ $ $ Sept. 30 $ $ Oct. 1 $ $ $ Dec. 1 $ $ Dec. 31 $ $ Post to the accounts Notes Payable, Interest Payable, and Interest Expense. Notes Payable 4/1 2/1 10/1 7/1 12/1 12/31 Bal. Interest Payable 4/1 3/31 10/1 9/30 12/31 12/31 Bal. Interest Expense 3/31 9/30 12/31 12/31 Bal. Show the balance sheet presentation of notes and interest payable at December 31. Current liabilities Notes payable $ Interest payable $ What is total interest expense for the year? $
Question 5
Building Your Marketing Plan (BYMP) Your final marketing plan should be between 4,000 and 6,000 words and must follow all APA guidelines. A sample marketing plan is providing in Doc Sharing. BYMP Week 1 (20 points): Page 23 - Select your product or service and write a company description as shown in Appendix A Page 51 (item 2 only) - Write the mission statement, goals, competitive advantage and perform a SWOT analysis. BYMP Week 2 (30 points): Page 91 - Identify trends related to the social, economic, technological, competitive, and regulatory forces that relate to your product or service and explain how each force represents a threat or an opportunity. Page 139 - Perform a consumer analysis for the product or service in your marketing plan. You will use this in your marketing mix decision. Page 161 - Estimate size of market using research you have done by analyzing information you can find in industry and trade publications and associations. By using the Internet to also research articles written by trade journals and industry experts and spokesmen. The government census is also a great resource for such industry statistics to help formulate market estimates and forecasts: U.S. Census BYMP Week 3 (20 points): Page 222 - Identify the most useful information you would most like to have and identify a source for the data. Page 248 - Prepare a market-product grid to focus your marketing and forecast sales. BYMP Week 4 (20 points): Page 275 - Fine tune your product strategy and identify points of difference of the product and generate ideas for new products. Page 304 - Identify stage in product life cycle, marketing mix, branding and packaging strategies. BYMP Week 5 (20 points): Page 352 - Establish preliminary pricing and calculate break-even under different pricing assumptions. Page 378 - Establish final pricing. BYMP Week 6 (40 points): Page 411 - Identify channels and intermediaries for your marketing plan. Page 485 - Develop promotion strategy for your marketing plan. Page 517 - Augment your promotion strategy with advertising and sales promotion. Page 597 - (items 1, 2, 3 only) Draw organization chart, Gantt chart and list critical success factors for your marketing plan The above 15 assignments are to be used to provide input to your final written marketing plan. An outline and sample are in Doc Sharing. Week 7 (190 points):
