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PtichkaEL [24]
2 years ago
8

Higgs Bassoon Corporation is a custom manufacturer of bassoons and other wind instruments. Its current value of operations, whic

h is also its value of debt plus equity, is estimated to be $200 million. Higgs has $110 million face value, zero coupon debt that is due in 3 years. The risk-free rate is 5%, and the standard deviation of returns for similar companies is 60%. The owners of Higgs Bassoon view their equity investment as an option and would like to know the value of their investment.
Required:
Using the Black-Scholes Option Pricing Model, how much is the equity worth?

Business
1 answer:
Gnom [1K]2 years ago
5 0

Answer:

123.63 million

Explanation:

From the given information:

The total value for the firm is $200 million

The face value of debt is $110 million

Maturity of debt = 3 years

Risk free rate = 5 %

Standard deviation of return = 60%

Using Black-Scholes Option Pricing Model, the equity worth is computed in an Excel file and the screenshot is show in the image attached below.

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Policies based on ABC analysis might include investing __________.A. extra care in forecasting for C items. B. more in supplier
Ilia_Sergeevich [38]

Answer:

Correct option is B

more in supplier development for A items.

Explanation:

In materials management, the ABC analysis is an inventory categorization technique. ABC analysis divides an inventory into three categories—"A items" with very tight control and accurate records, "B items" with less tightly controlled and good records, and "C items" with the simplest controls possible and minimal records.

The ABC analysis provides a mechanism for identifying items that will have a significant impact on overall inventory cost, while also providing a mechanism for identifying different categories of stock that will require different management and controls.

6 0
2 years ago
One operator services a bank of five machines. Machine running time and service time are both exponential. Machines run for an a
Nady [450]

Answer:

Average hourly output is 13.14 pieces.

Explanation:

Number of machines at the bank N = 5

Average service time T = 26 min

Machine runs for an Average R = 74 min

Number of servers M = 1

Service Factor, X = T / (T+R)

= 26 / (26+74)

= 0.26

Efficiency Factor, F = 0.683

Average Number of machine running A = N * F * (1 - X)

= 5 * 0.683 * (1 - 0.26)

= 2.52

Output rate = 26 * (A / N)

= 26 * ( 2.52 / 5)

= 13.14 per hour.

7 0
2 years ago
Question 1 Jenson College provides its own housekeeping services. The College director would like to outsource this service and
NeX [460]

Answer:

c)Qualitative factors that affects outsourcing decision"

1)Quality of services :Whether the company to whom services are outsourced is capable enough or has sufficient experience in providing housekeeping services .A bad quality service can destroy customer /client relations .

2)Long term relations : whether the company to whom services are outsourced is trustworthy and is interested to maintain long term relations .

6 0
2 years ago
Sandhill Co. purchased a new machine on October 1, 2022, at a cost of $67,560. The company estimated that the machine has a salv
DanielleElmas [232]

Answer:

Results are below.

Explanation:

Giving the following formula:

Purchase price= $67,560

Salvage value= $6,900

Useful life= 6 years

<u>To calculate the depreciation expense under the straight-line method, we need to use the following formula:</u>

<u></u>

Annual depreciation= (original cost - salvage value)/estimated life (years)

Annual depreciation= (67,560 - 6,900) / 6

Annual depreciation= $10,110

<u>2022:</u>

Annual depreciation= (10,110/12)*3= $2,527.5

<u>2023:</u>

Annual depreciation= $10,110

3 0
2 years ago
The discovery of a large oil deposit off a nation's shores would be what type if economic variable?
Varvara68 [4.7K]
The discovery of oil off a nation's coast would be if it wasunexpected, a surprise economic variable and a very beneficial one at that as long as it happened before the present concerns about climate change and the use of fossil fuels plus concerns over oil spills in the ocean after the Gulf of Mexico major oil spill a few years ago.
6 0
2 years ago
Read 2 more answers
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