Answer:
$3,500
Explanation:
The computation of Dorothea's recomputed gain is shown below:-
Particulars Amount
Initial Sale price $92,000
Less: Adjusted Cost of Home ($95,000)
Less: Original Sale Expenses ($1,150)
Loss from 1st-time sale $4,150
Resold sale price $100,000
Less: Repossessed Cost ($87,000)
Less: Improvements Costs prior to
Resale ($1,100)
Less: Repossession Costs ($2,900)
Less: Resale Expenses ($1,350)
Gain from Resale of Home $7,650
Less: Loss from 1st-time sale ($4,150)
Gain from Resale of Home $3,500
Nori files a suit against Mica to enforce an oral contract that would otherwise be unenforceable under the Statute of Frauds.The court could enforce such a contract if:________
A) Nori foreseeably and justifiably relied on Mica's promise to her detriment.
B) Mica denies the existence of any contract.
C) neither party has begun to perform.
D) the deal does not involve customized goods.
Answer: A. Nori foreseeably and justifiably relied on Mica's promise to her detriment.
Explanation:
From the question, we are informed that Nori files a suit against Mica to enforce an oral contract that would otherwise be unenforceable under the Statute of Frauds.
The court could enforce such a contract if Nori foreseeably and justifiably relied on Mica's promise to her detriment.
king costume uses a periodic inventory system. The company started the month with 9 masks in its begining inventory that cost %8 each. During the month, King Costume purchased 41 additional masks for $10 each. At the end of the month, King counted its inventory and found that 3 masks remained unsold. Using the LIFO method, its cost of goods sold for the month is:______.
a. $434.
b. $440.
c. $24.
d. $428.
The options given in the question are incorrect. The options are correct with respect to the question if beginning inventory is 6 masks.
Answer:
The cost of goods sold for the month is $458
Explanation:
The LIFO or last in first out is a method for inventory valuation. It values the closing inventory assuming that it contains the units that were present in the inventory at the very start of the period. Thus, the cost of goods sold contains the units that were most recently purchased.
The number of units available for sale was = 9 + 41 = 50
The sales in units = 50 - 3 = 47
Out of the 47 units of masks sold, under LIFO, the 41 masks will be from the masks purchased in the month while the remaining 6 masks will be from the opening inventory as the inventory that is bought later is sold first.
The cost of goods sold for the month under LIFO will be,
Cost of Goods Sold
41 masks at $10 each $410
6 masks at $8 each $48
Total value of COGS $458
The following information is taken from the financial statements of Burton Industries:________.
Total Assets $360,000
Total Liabilities 162,000
Total Stockholders' Equity 198,000
Net Income 126,000
Income Tax Expense 37,800
Interest Expense 9,000
a. 18.2
b. 15.0
c. 4.7
d. 19.2.
Answer:
d. 19.2
Explanation:
The missing question is "The company's times interest earned ratio is?"
Solution
Interest Earned Ratio = Income before Interest and taxes or EBIT / Interest Expenses
Net Income $126,000
Add: Income taxes $37,800
Add: Interest Expenses $9,000
EBIT $172,800
Hence, Interest Earned Ratio = EBIT / Interest Expenses
Interest Earned Ratio = $172,800 / $9,000
Interest Earned Ratio = 19.2
Camel Company sells a segment of its operations at a loss. Camel has not previously experienced such an event and does not expect to again. The loss from the disposal of the segment should be reported in the income statement as:
Answer: a separate amount in a discontinued operations section
Explanation:
From the question, we are informed that Camel Company sells a segment of its operations at a loss and that Camel has not previously experienced such an event and does not expect to again.
The loss from the disposal of the segment should be reported in the income statement as a separate amount in a discontinued operations section. This is because Camel is not interested in experiencing such event anymore as it's going to b discontinued.
(a) Complete the following cost and revenue schedules for a perfectly competitive firm:
Quantity Price ( $Total Revenue ($) Total Cost ($) Profit ($) Marginal Cost ($)
0 60 50 ---
1 60 60
2 60 90
3 60 140
4 60 200
5 60 280
(b) Graph MC and price.
(c) What rate of output maximizes profit?
(d) What is MC at that rate of output?
Answer:
(a) See the attached excel file
(b) See the attached photo
(c) Quantity 4
(d) MC = $60
Explanation:
Note: The data in the question are merged but they are first sorted appropriately before answering the question in the attached excel file.
(a) Complete the following cost and revenue schedules for a perfectly competitive firm
Note: See the attached excel file for the schedule
The following formula are used in the table:
Total revenue = Quantity * Price
Profit = Total revenue - Total cost
Marginal cost = New unit total cost - Previous unit total cost
(b) Graph MC and price.
Note: See the attached photo for the graph
(c) What rate of output maximizes profit?
The rate of output that maximizes profit occurs where MC = Price. This occurs at quantity 4 on the attached excel file and point A in the attached graph where MC = Price = $60
(d) What is MC at that rate of output?
From part (c), MC at that rate of output is $60.
Copa Corporation is considering the purchase of a new machine costing $150,000. The machine would generate net cash inflows of $43,690 per year for 5 years. At the end of 5 years, the machine would have no salvage value. Copa’s cost of capital is 12 percent. Copa uses straight-line depreciation. The present value factors of annuity of $1.00 for different rates of return are as follows:
Period 12% 14% 16% 18%
4 3.0373 2.91371 2.79818 2.69006
5 3.60478 3.43308 3.27429 3.12717
6 4.1141 3.88867 3.68474 3.49760
The proposal's internal rate of return (rounded to the nearest percent) is:__________
A. 14 percent.
B. 16 percent.
C. 18 percent.
D. 12 percent.
Answer:
A
Explanation:
Internal rate of return is the discount rate that equates the after tax cash flows from an investment to the amount invested
IRR can be calculated with a financial calculator
Cash flow in year 0 = $-150,000
Cash flow each year from year 1 to 5 = $43,690
IRR = 14%
To find the IRR using a financial calculator:
1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.
2. After inputting all the cash flows, press the IRR button and then press the compute button.
Jacob is self-employed and reports all of his income and expenses in his personal income tax return. ______________
Answer:
Sole proprietorship
Explanation:
The sole proprietorship is the business organization in which there is only one owner who controls its day to day operations. In this, the owner has unlimited liability as he does whatever he wants without any restrictions
Also, in this the person should file his return on the personal income tax return where he disclosed all his incomes and expenses during the year
So this is an example of Sole proprietorship
Plattsburgh Tech’s annual demand is 3,000 units which costs $30 per unit. You are in charge of inventory management of Plattsburgh Tech. You know that the annual holding cost is 20% of the unit price and ordering cost is $102.40 per order. Plattsburgh Tech. operates 300 days a year.
Required:
a. Compute EOQ
b. Compute the total inventory cost for EOQ
c. Compute the length of an order cycle
d. Compute ROP assuming that the delivery load time is three days
Answer:
a. 320 units
b. $1,920
Explanation:
EOQ = √ 2 × Annual Demand × Ordering Cost per Order / Holding Cost per unit
= √ (2 × 3,000 units × $102.40 / ($30 × 20%))
= 320 units
total inventory cost = ordering cost + holding cost
= 3,000 units/ 320 units × $102.40 + 320 units/ 2 × ($30 × 20%
= $960 + $960
= $1,920
Crane Company has two divisions—Standard and Premium. Each division has hundreds of different types of tennis racquets and tennis products. The following information is available: (Round answer to 0 decimal places, e.g. 5,275.) Standard Division Premium Division Total Sales $300000 $700000 $1000000 Variable costs $180000 280000 Contribution margin $120000 $420000 Total fixed costs $300000 What is the break-even point in dollars?
Answer:
The break-even point sales in dollars are $555,555.60
Explanation:
Contribution margin ratio= (Total contribution margin / Total sales ) ×100
Contribution margin ratio= (S′ s contribution margin + P's contribution margin) / Total sales * 100
Contribution margin ratio = $120000 + $420000) / $1000000 * 100
Contribution margin ratio = 54%
Therefore, the contribution margin ratio of sales mix is 54%.
Break Even Point sales = Fixed cost / Contribution margin ratio
=$300,000 / 54%
=$555,555.60
Therefore, the break-even point sales in dollars are $555,555.60
Jasper makes a $25,000, 90-day, 7% cash loan to Clayborn Co. Jasper's entry to record the transaction should be
Answer:
Date Journal Entry Debit Credit
Cash $25,437.50
Interest Revenue $437.50
Note Receivable $25,000
Workings
Interest = $25,000 * 7% * 90/360 = $437.50
Cash received = $25437.50
Honeycutt Co. is comparing two different capital structures. Plan I would result in 12,700 shares of stock and $109,250 in debt. Plan II would result in 9,800 shares of stock and $247,000 in debt. The interest rate on the debt is 10 percent. The all-equity plan would result in 15,000 shares of stock outstanding. Ignore taxes for this problem. a. What is the price per share of equity under Plan I
Answer: $47.50
Explanation:
The price pr share given debt and the number of shares if the company had both an all equity structure and a mixed structure can be expressed as;
Price per Share = Debt Value / (Number of Shares under All-equity plan - Number of shares under mixed plan)
Price per share = 109,250 / (15,000 - 12,700)
= 109,250 / 2,300
= $47.50
You own a portfolio equally invested in a risk-free asset and two stocks. One of the stocks has a beta of 1.31 and the total portfolio is equally as risky as the market. What must the beta be for the other stock in your portfolio?
Answer:
the beta of stock₂ = 1.69
Explanation:
the weight of each security is ¹/₃ of the portfolio:
the risk free asset has a beta of 0stock₁ has a beta of 1.31stock₂ has a beta of ?the portfolio's beta is 1
1 = (¹/₃ x 0) + (¹/₃ x 1.31) + (¹/₃ x ?)
1 = 0.437 + (¹/₃ x ?)
1 - 0.437 = (¹/₃ x ?)
0.563 = (¹/₃ x ?)
? = 0.563 / ¹/₃ = 1.689 = 1.69
the beta of stock₂ = 1.69
alley Spa purchased $10,800 in plumbing components from Tubman Co. Valley Spa signed a 60-day, 10% promissory note for $10,800. If the note is dishonored, but Tubman intends to continue collection efforts, what is the journal entry to record the dishonored note
Answer: PLease find the answer below
Explanation:
journal entry to record the dishonored note
Account title Debit Credit
Accounts Receivable—Valley Spa $10,980
Interest Revenue $180
Notes Receivable $10,800.
Interest Revenue = Principal x rate x period
= 10,800 x 10% x 60/360( using 360 days =1 year)
=$180
Provide two examples of goods/services that are classified as private goods/services even though they are provided by a federal government.
Answer: Post office; toll roads
Explanation:
Private goods are goods that have two main features which are rivalry and excludability. Private goods have to be bought before they can be used.
The goods/services that are classified as private goods/services even though they are provided by a federal government are post offices and toll roads.
Even though they're both provided by the government, individuals have to pay to use toll roads and also had to pay for stamps and other things before their delivery are made at the post office.
Mannix Corporation stock currently sells for $57 per share. The market requires a return of 11 percent on the firm’s stock. If the company maintains a constant 3.75 percent growth rate in dividends, what was the most recent dividend per share paid on the stock?
Answer:
$3.98 per share
Explanation:
Calculation for what was the most recent dividend per share paid on the stock
First step is to find the price of stock
Using this formula
Price of stock = Next Expected Dividend/(Required Return - Growth Rate)
Let plug in the formula
$57 = D1/(11%-3.75%)
D1=$57×0.0725
D1 = 4.1325
Second step is to find the most recent dividend per share paid on the stock
Using this formula
Most recent dividend = Next Expected Dividend/(1+growth Rate)
Let plug in the formula
Most recent dividend= 4.1325/(1.0375)
Most recent dividend=$3.98 per share
Therefore the most recent dividend per share paid on the stock will be $3.98 per share
You buy a share of stock, write a one-year call option with X = $12, and buy a one-year put option with X = $12. Your net outlay to establish the entire portfolio is $11.50. What must be the risk-free interest rate? The stock pays no dividends.
Answer:
4.35%
Explanation:
You buy a share of stock, write a one-year call option with X = $12, and buy a one-year put option with X = $12. Your net outlay to establish the entire portfolio is $11.50. What must be the risk-free interest rate? The stock pays no dividends.
Given the following :
1 - year call option with X = $12
1- year put option with X = $12
Net outlay to establish portfio = $11.50
No dividend
Risk-free interest rate :
(X / net outlay) - 1
(12 / 11.50) - 1
1.0434782 - 1
= 0.0434782
Expressing as a percentage :
0.0434782 * 100
= 4.347%
=4.35%
If your 60-year-old customer purchases a nonqualified variable annuity and withdraws some of her funds before the contract is annuitized, what are the consequences of this action?
Answer: Ordinary income tax on earnings exceeding basis.
Explanation:
From the question, we are informed that a 60-year-old customer purchases a nonqualified variable annuity and withdraws some of her funds before the contract is annuitized.
The consequences of this action is that Ordinary income tax on earnings exceeding basis. It should be note that the distributions from a nonqualified plan had to do with return on original investment and income from the investment. Since there's defer of the income, it'll be taxable as an ordinary income.
Assume that during the past year the consumer price index increased by 1.5 percent and the securities listed below returned the following nominal rates of return.
U.S Government T-bills 5.50%
U.S Government Long-term bonds 6.25
A. What are the nominal rates of return for each of these securities?
B. If next year the nominal rates all rise by 10 percent (i.e. multiply by 1.1, do NOT add 0.10) while inflation climbs from 4 percent to 5 percent, what will be the real rate of return on each security?
Answer:
A)
U.S Government T-bills 5.50%
U.S Government Long-term bonds 6.25%
B)
real rate of return = [(1 + nominal rate) / (1 + inflation rate)] - 1
U.S Government T-bills 5.50%
nominal rate = 5.5% x 1.1= 6.05%
inflation rate = 5%
real rate of return = [(1 + 6.05%) / (1 + 5%)] - 1 = 1%
U.S Government Long-term bonds 6.25
nominal rate = 6.25% x 1.1= 6.875%
inflation rate = 5%
real rate of return = [(1 + 6.875%) / (1 + 5%)] - 1 = 1.79%
The constraint at Johngrass Corporation is time on a particular machine. The company makes three products that use this machine. Data concerning those products appear below: VT UV LQ Selling price per unit $335.09 $228.37 $199.12 Variable cost per unit $259.44 $173.26 $159.79 Minutes on the constraint 6.60 3.40 4.60 Assume that sufficient time is available on the constrained machine to satisfy demand for all but the least profitable product. Up to how much should the company be willing to pay to acquire more of the constrained resource
Answer:
$8.55 per minute
Explanation:
The computation of willing to pay to acquire more of the constrained resource is shown below:-
= (Selling price - Variable cost) ÷ Minutes on the constraint
= ($199.12 - $159.79) ÷ 4.60
= $39.33 ÷ 4.60
= $8.55 per minute
Therefore for computing the willingness to pay to acquire more of the constrained resource we simply applied the above formula.
Jenna decides to purchase a U.S. Treasury Bill for 95,000. The Treasury Bill matures in 180 days for 100,000. Let QR be the quoted rate on this U.S. Treasury Bill. Let j be the annual effective yield on this U.S. Treasury Bill assuming a 365 day year. Calculate j−QR.
Answer:
J-QR =0.96
Explanation:
Quoted interest rate(QR) is nominal interest rate that does not take compounding into consideration
Effective interest rate(J) is real interest rate that accounts for compounding
face value of tbill = 100,000
price = 95,000
time remaining for maturity, n = 180
QR T-Bill = [(Face Value - Price)/(Face Value)] *(360/n) = [(100,000-95,000)/100,000]*(360/180) = (5000/100,000)*2 = 0.10 or 10%
j = (1+ ((Face Value - Price)/price))(365/n) -1 = (1+((100,000-95,000)/95,000))(365/180) -1 = (1+(5000/95000))2.027778 -1 = 0.1096131
j = 0.1096131 or 10.96131% or 10.96%
Therefore j-QR = 10.96-10 = 0.96%
Find the duration of a bond with settlement date June 11, 2018, and maturity date December 15, 2027. The coupon rate of the bond is 4%, and the bond pays coupons semiannually. The bond is selling at a yield to maturity of 5%.
Answer:
The duration of a bond is 7 years and 7 months.
Explanation:
The settlement date is the date that the bond transaction is concluded, the date that the buyer must pay for the bond and the seller must deliver the asset.
The maturity date is the date where the seller will receive an amount equal to the principle or nominal amount of the bond.
Thus, the duration of the bond is the period between the settlement date (June 11, 2018) and the maturity date (December 15, 2027).
The period is 7 years and 7 months
Holding all else constant, which of the following demand schedules is most likely to represent New York Mets T-shirts if they win the World Series?
A.
Quantity
Price Demanded
$8.00 200
$10.00 175
$12.00 150
$14.00 100
$16.00 50
B.
Price Demanded
$8.00 250
$10.00 200
$12.00 175
$14.00 150
$16.00 100
C.
Price Demanded
$8.00 175
$10.00 150
$12.00 125
$14.00 75
$16.00 25
D.
Price Demanded
$8.00 250
$10.00 125
$12.00 100
$14.00 100
$16.00 100
E.
Price Demanded
$8.00 50
$10.00 100
$12.00 150
$14.00 175
$16.00 200
A. A.
B. B.
C. C.
D. D.
E. E.
Answer: Option B
Explanation:
If the New York Mets win the World Series, their shirts will be more sought after as more fans will want to identify with them. This will reflect on the demand for their shirts by quantity demanded increasing at every price.
In Option B that is the case. At a price of $8, the quantity demanded has increased to 250 from 200, for $10 it has increased from 175 to 200 and so on thus reflecting that at every price, demand has gone up.
What would the year 3 stock price need to be to meet your required rate of return of 13%?
Answer: $105.49
Explanation:
The Value of the stock today is given by;
[tex]P = \frac{D1}{1 + r} + \frac{D2}{(1+r)^2} + \frac{D3}{(1+r)^3} + \frac{P3}{(1+r)^3}[/tex]
[tex]80 = \frac{2}{1 + 0.13} + \frac{3}{(1+0.13)^2} + \frac{4}{(1+0.13)^3} + \frac{P3}{(1+0.13)^3}[/tex]
[tex]P3 = (80 * {1.13^3) - (\frac{2}{1.13} + \frac{3}{1.13^2} + \frac{4}{1.13^3})[/tex]
P3 = $105.49
Josh was a mechanic. One day when he attempted to weld a car's gasoline tank, it exploded and he was hurt. He filed to collect workers' compensation. His employer resisted on grounds that Josh had been negligent and had also violated the express regulations of the company when he attempted to weld a gasoline tank. Which statement is correct
Answer:
Josh can recover even if he was negligent and violated the employer's rules.
Explanation:
Worker's compensation is a type of insurance that covers wage and medical costs of an employee that was injured in the course of working for the employer.
Accidents can happen during the course of doing official duty, so worker's compensation provides a cover from financial burden when the employee becomes unproductive as a result of the accident.
Generally the issue of negligence on the part of the employee is not considered.
So Jos will be able to recover worker compensation when he was injured from the car gas tank explosion.
Social media allow marketers to build or tap into online communities, inviting participation from consumers and creating a long-term marketing asset in the process. Tru eor False
Answer:
True.
Explanation:
Digital marketing is growing substantially worldwide, as the internet has revolutionized the way people communicate and shop.
Social networks are social interaction platforms where there are several possibilities for business exploration for marketers. Through social networks it is possible to capture new customers, collect important market data and information, build relationships with consumers and build online communities where it is possible to create long-term marketing assets that will generate positive returns for a company.
There are several paths in digital marketing, it is necessary for marketers to choose those most aligned with the company's business and thus outline essential marketing strategies for attracting and retaining customers who interact on social networks and from there develop a marketing asset for generating revenue and profits.
Distinguish between serial activities and concurrent activities why do we seek to use concurrent activities as a way to shorten the project length
Answer and Explanation:
Serial activities are activities that are performed one after the other. In serial activities, one step in a job is finished before the other step starts. In other words more time may be spent as against concurrent activities whereby the two steps in a job can be performed at the same time such that the second step can start while the first step of the job is in progress. Managers prefer concurrent activities because it saves time as jobs are completed faster when steps can be performed "concurrently"
The following data have been extracted from the financial statements of Prentiss, Inc., a calendar-year merchandising corporation:
December 31,
Balance Sheet Data 2017 2018
Trade accounts receivable-net 84,000 78,000
Inventory 150,000 140,000
Accounts payable-merchandise (credit) (95,000) (98,000)
Total sales for 2018 were $1,200,000 and for 2017 were $1,100,000.
Cash sales were 20 % of total sales each year
Cost of goods sold was $840,000 for 2018.
Variable general and administrative (G&A) expenses for 2018 were $120,000.
These expenses are the same proportion of sales every year and have been paid at the rate of 50% in the year incurred and 50% the following year. Unpaid G&A expenses are not included in accounts payable. Fixed G&A expenses, including $35,000 depreciation and $5,000 bad debt expense, totaled $100,000 each year. The amount of such expenses involving cash payments was paid at the rate of 80% in the year incurred and 20% the following year. In each year, there was a $5,000 bad debt estimate and a $5,000 write-off. Unpaid G&A expenses are not included in accounts payable.
Required: Compute the following:
1. The amount of cash collected during 2018 that resulted from total sales 2017 and 2018.
2. The amount of cash disbursed during 2018 for purchases of merchandise.
3. The amount of cash disbursed during 2018 for variable and fixed G&A expenses
Answer:
Prentiss, Inc.
Computation of:
1. The amount of cash collected during 2018 that resulted from total sales 2017 and 2018:
2018
Beginning Trade accounts receivable 84,000
Credit Sales 960,000
Ending Trade accounts receivable-net (78,000)
Cash received from customers 966,000
Cash sales (20% of Sales) 240,000
Total cash collected $1,206,000
2. The amount of cash disbursed during 2018 for purchases of merchandise:
2018
Beginning Accounts payable-merchandise 95,000
add Purchases (Cost of goods sold) 840,000
less Ending Accounts payable-merchandise 98,000
Cash disbursed for purchases of merchandise $837,000
3. The amount of cash disbursed during 2018 for variable and fixed G&A expenses:
Fixed:
80% of $60,000 paid in the year = $48,000
20% of $60,000 for last year's = 12,000
Cash disbursed for Fixed G&A = $60,000
Variable:
80% of $120,000 paid in the year = $96,000
20% of $110,000 for last year's = 22,000 $118,000
Total G&A paid during 2018 = $178,000
Explanation:
a) Data and Calculations:
1. December 31,
Balance Sheet Data 2017 2018
Trade accounts receivable-net 84,000 78,000
Inventory 150,000 140,000
Accounts payable-merchandise (credit) (95,000) (98,000)
Total sales $1,100,000 $1,200,000
Cash sales were 20 % of total sales each year
Cost of goods sold was $840,000 for 2018
Cost of goods sold for 2017 = $770,000 ($840,000/1,200,000 x $1,1,00,000)
Variable general and administrative (G&A) expenses for 2018 were $120,000
Variable general and administrative (G&A) expenses for 2017 $110,000 ($120,000/$1,200,000 x $1,100,000)
Fixed general and administration (G&A) expenses for each year = $100,000
Cash paid for Fixed general and administration:
Total amount = $100,000
less depreciation 35,000
less bad debts 5,000
Cash paid for fixed $60,000
_____________, is the measure of how popular a product is. a) Marketability b) Profitability c) Popularity d) Consumability
Popularity is the measure of how popular a product is.
Product popularity is defined as the extent to which a product is purchased by the general public. The popularity appeal helps to persuade targeted customers with an advertisement. Product reviews are one of the most efficient ways of branding and marketing your online store. A good review can always increase the popularity and reliability of a product.
Popularity is the measure of how popular a product is.
For more information:
https://brainly.com/question/24023662?referrer=searchResults
Coronado Industries purchased land as a factory site for $1350000. Coronado paid $116000 to tear down two buildings on the land. Salvage was sold for $8300. Legal fees of $5160 were paid for title investigation and making the purchase. Architect's fees were $46600. Title insurance cost $3500, and liability insurance during construction cost $3800. Excavation cost $15500. The contractor was paid $4400000. An assessment made by the city for pavement was $9900. Interest costs during construction were $260000. The cost of the land that should be recorded by Coronado Industries is
Answer:
The cost of the land that should be recorded by Coronado Industries is $1,492,860.
Explanation:
Cost of Land = Purchase Value + Cost Incurred to Tear Down 2 Buildings - Salvage + Legal Fees + Title Insurance Cost + Assessment Cost
Cost of Land = $1,350,000 + $116,000 + $8,300 + $5,160 + $3,500 + $9,1900
Cost of Land = $1,492,860
Thus, the cost of the land that should be recorded by Coronado Industries is $1,492,860
An investor purchases a long call at a price of $2.60. The strike price at expiration is $37. If the current stock price is $37.10, what is the break-even point for the investor?
Answer: $39.60
Explanation:
A long call makes a profit when the price of the underlying stock is higher than the strike price and the cost of acquiring the call.
The Break-even point for the investor will be at the point where the underlying stock price will be the same as the strike price plus the cost paid to purchase the call.
Break-even point = Strike price + Price of call
= 37 + 2.60
= $39.60