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Black-Scholes Model Assume that you have been given the following information on Purcell Industries: Current stock price = $15 Strike price of option = $14 Time to maturity of option = 6 months Risk-free rate = 8% Variance of stock return = 0.11 d1 = 0.582008 N(d1) = 0.719719 d2 = 0.347487 N(d2) = 0.635887 According to the Black-Scholes option pricing model, what is the option's value? Round your answer to the nearest cent. $
You’re trying to determine whether to expand your business by building a new manufacturing plant. The plant has an installation cost of $13 million, which will be depreciated straight-line to zero over its four-year life.
What is the effective annual rate (EAR) for each of the following one-year, $1,000 bank loans? A loan with an APR of 5.8%, compounded monthly. A loan with an APR of 5.8%, compounded annually, that also has a compensating balance requirement of 9.5% (..
FINC 430 Financial Management - Acquisition Proposal Research Project Describe what you believe to be the primary issues/needs of the parties involved (i.e., target firm stakeholders) and -Recommend a deal structure that addresses the primary needs ..
Aria Acoustics, Inc. (AAI), projects unit sales for a new seven-octave voice emulation implant as follows: Year Unit Sales 1 75,000 2 88,000 3 102,000 4 97,000 5 78,000 Production of the implants will require $1,540,000 in net working capital to star..
A sporting goods manufacturer has decided to expand into a related business. Management estimates that to build and staff a facility of the desired size and to attain capacity operations would cost $430 million in present value terms. What is the max..
Mitts Cosmetics Co.'s stock price is $60.31, and it recently paid a $2.50 dividend. This dividend is expected to grow by 24% for the next 3 years, then grow forever at a constant rate, g; and rs = 15%. At what constant rate is the stock expected to g..
You plan to make a series of deposits into a interest bearing account earning 11%. You will deposit $2000 today, $3000 two years from today, and $9000 five years from today. If you withdraw $2000 four years from today and $5000 seven years from today..
T. Walcott Company(TWC) is considering a project that has the following cash flow and WACC data. What is the project’s discounted payback, NPV, IRR, and MIRR?
The prices of European call and put options on a non-dividend-paying stock with 6 months to maturity, and a strike price of $100 are $20 and $5, respectively. The current stock price is $110. What is the implied risk-free rate? Quote the rate as an a..
You recently purchased a stock that is expected to earn 19 percent in a booming economy, 14 percent in a normal economy, and lose 3 percent in a recessionary economy. There is a 21 percent probability of a boom, a 70 percent chance of a normal econom..
You have been offered the opportunity to invest in a project that will pay $4,672 per year at the end of years one through three and $7,543 per year at the end of years four and five. These cash flows will be placed in a saving account that pays 11.3..
If you borrow $5300 at $400 interest for one year, what is your effective interest rate for the following payment plans?
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