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Consider a single-stock futures contract on Apple stock. Consider the following scenario:
Annualized, continuously compounded risk-free interest rate for 2-month period: r = 4.09%.
Annualized, continuously compounded risk-free interest rate for 4-month period: r = 6.71%.
Current spot price of Apple stock: $562 per share.
Dividend per share of $0.7 in 2 months.
Contract expiration: T = 4 months.
Futures price on Apple single-stock futures: $600 per share.
An arbitrage opportunity exists. What is the net profit per share when the futures contract expires? Use a strategy that has zero net cash flows today and zero net cash flows in two months.
We are examining a new project. We expect to sell 6,000 units per year at $74 net cash flow apiece for the next 10 years. In other words, the annual operating cash flow is projected to be $74 × 6,000 = $444,000. If success and failure are equally lik..
Private equity investors are planning to provide financing to Jones Machinery and has approached your firm to perform a valuation assessment of Jones. Jones Machinery has 3 million shares outstanding and a target capital structure consisting of 30 pe..
The company you work for is set to pay 10,000,000 Pounds at the end of 2017. Do you buy or sell Pound futures?
If Chester were to absorb the new labor costs without passing them on in the form of higher prices, how many units of product Cure would need to be sold next round to break even on the product?
Callable bond-If the bond is not expected to be called, what is the price of the bond?
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Could I Industries just paid a dividend of $1.87 per share. The dividends are expected to grow at a 15 percent rate for the next 3 years and then level off to a 5 percent growth rate indefinitely. If the required return is 17 percent, what is the val..
The market price of the firm’s preferred stock is $116.00. The preferred pays a 12.1% annual dividend on its $100 par value. Floatation costs are $4 per share. What is the cost of preferred equity when floatation costs are accounted for?
A productivity index of 110% means that a company’s labor costs would have been 10% higher if it had not made production improvements. Assume that Baldwin had a productivity index of 112% and that Chester had a productivity index of 103%. Using the l..
Nico Nelson, a management trainee at a large New York-based bank is trying to estimate the real rate of return expected by investors. He notes that the 3-month T-bill currently yields 3 percent and has decided to use the consumer price index as a pro..
Bottoms Up Diaper Service is considering the purchase of a new industrial washer. It can purchase the washer for $3,000 and sell its old washer for $800. The new washer will last for 6 years and save $600 a year in expenses. what is the annual operat..
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