QUESTION 73

The following data apply to the next 6 questions.

Suppose the following is the part of the WSJ listed options quotations on 12/1/2016; on that day IBN stock price was $53.

Strike	Exp.	Call	Put
50	Jan	5	1.06
50	Apr	3.50	1.25
.	.	.	.
55	Jan	1.50	5
.	.	.	.
60	Jan	0.50	8
60	Apr	1.50	9.50
60	Jul	2.38	10.75

Which one of the following is out of the money?

		50 Jan Call
		50 Apr Call
		55 Jan Call
		60 Jan Put
		60 Apr Put

QUESTION 74

What is the exercise value, or the intrinsic =parity. value of the Apr 60 put option?

		$3
		$5
		$7
		$8
		$10

QUESTION 75

How much time value is in the Apr 60 put option?

		$1
		$2.5
		$3.5
		$4.5
		$5.5

QUESTION 76

Suppose today you buy an IBN Jan 50 call for the price listed. At expiration, IBN stock. sells for $61. What is the profit per contract?

		$300
		$500
		$600
		$800
		$1200

QUESTION 77

Suppose you buy an IBN Apr 50 put for the price listed. At expiration, IBN stock sells for $45. What is your profit per contract?

		$150
		$250
		$375
		$400e. $550

QUESTION 78

Assume the call premium of $5 for IBN Jan 50 call option is right. Then the underlined price of $3.50 for Apr 50 call cannot be true. Which one of the following is a reasonable price for the option?

		$2.5
		$3
		$3.5
		$4.5
		$5.5

QUESTION 65

For the next 8 questions suppose the following data:

Meals on Wings Inc. supplies prepared meals for corporate aircraft (as opposed to public commercial airlines), and it needs to purchase new broilers. If the broilers are purchased, they will replace old broilers purchased 10 years ago for $150,000 and which are being depreciated on a straight line basis to a zero salvage value (15 year depreciable life). The old broilers can be sold for $60,000. The new broilers will cost $180,000 installed and will be depreciated using MACRS over their 5 year class life (20%, 32%, 19%, 12%, 11%, 6%); they will be sold at their book value at the end of the 5th year. The firm expects to increase its revenues by $60,000 per year if the new broilers are purchased, but cash expenses will also increase by $20,000 per year. The firm's cost of capital is 10 percent and its tax rate is 40 percent.

What is the initial capital outlay at t=0?

		$110,500
		$115,000
		$124,000
		$150,000
		$152,500

QUESTION 72

What is the NPV of the project?

		$-6,457
		$5,641
		$11,751
		$18,433
		$21,155