INTER. ACCOUNTING - CONNECT+ALEKS ACCESS
10th Edition
ISBN: 9781264770335
Author: SPICELAND
Publisher: MCG
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Chapter 19, Problem 19.14BE
To determine
Earnings per share (EPS): The amount of earnings made available to each common share is referred to as earnings per share. Dilutive securities like convertible bonds, convertible
To determine: The weighted average number of shares to be included in the computation of EPS
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Question 6
In January 2024, Amazon shares are priced at $80 a share. You believe that theyare overvalued and are worth only $30 a share. June 2024 put options on a strike priceof $60 a share are currently valued at $5. Each put contract is based on 100 shares.(i) What is the intrinsic value of the put option per share? (ii) What is the time value of the put option per share? (iii) If we arrive at expiry in June and you are proved correct with Amazon shares sellingfor $30, what is your net dollar profit on a single put options contract in dollars bearing inmind the put option is based on a contract of 100 shares?(iv) What is your net dollar profit (+) or loss (-) as a holder of the put contract (based on a contract size of 100 shares) if we arrive at expiry in June and you are wrong and Amazon shares are selling for $100?
Question 6
In January 2024, Amazon shares were priced at $80 a share. You believe that they are overvalued and are worth only $30 a share. June 2024 put options on a strike price of $60 a share are currently valued at $5. Each put contract is based on 100 shares.
(i) What is the intrinsic value of the put option per share?
(ii) What is the time value of the put option per share?
(iii) If we arrive at expiry in June and you are proved correct with Amazon shares selling for $30, what is your net dollar profit on a single put options contract in dollars bearing in mind the put option is based on a contract of 100 shares?
(iv) What is your net dollar profit (+) or loss (-) as a holder of the put contract (based on a contract size of 100 shares) if we arrive at expiry in June and you are wrong and Amazon shares are selling for $100?
Q19
A 7 year, 5% preferred stock at OMR 100 less cost of flotation 5% and cost of underwriting commission charges at 2%, what would be cost of preferred stock, assume the corporate tax rate is 50%?
a.
6.21%
b.
5.85%
c.
5.15%
d.
5.37%
Chapter 19 Solutions
INTER. ACCOUNTING - CONNECT+ALEKS ACCESS
Ch. 19 - Prob. 19.1QCh. 19 - Prob. 19.2QCh. 19 - The Tax Code differentiates between qualified...Ch. 19 - Stock option (and other share-based) plans often...Ch. 19 - What is a simple capital structure? How is EPS...Ch. 19 - Prob. 19.6QCh. 19 - Blake Distributors had 100,000 common shares...Ch. 19 - Why are preferred dividends deducted from net...Ch. 19 - Prob. 19.9QCh. 19 - The treasury stock method is used to incorporate...
Ch. 19 - The potentially dilutive effect of convertible...Ch. 19 - How is the potentially dilutive effect of...Ch. 19 - Prob. 19.13QCh. 19 - If stock options and restricted stock are...Ch. 19 - Wiseman Electronics has an agreement with certain...Ch. 19 - Prob. 19.16QCh. 19 - When the income statement includes discontinued...Ch. 19 - Prob. 19.18QCh. 19 - Prob. 19.19QCh. 19 - (Based on Appendix B) LTV Corporation grants SARs...Ch. 19 - Prob. 19.1BECh. 19 - Prob. 19.2BECh. 19 - Prob. 19.14BECh. 19 - Prob. 19.15BECh. 19 - Prob. 19.10ECh. 19 - EPS; concepts; terminology LO195 through LO1913...Ch. 19 - FASB codification research LO192 The FASB...Ch. 19 - Prob. 19.28ECh. 19 - Communication Case 1911 Dilution LO199 I thought...Ch. 19 - Prob. 19.12DMP
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