There are two questions to be answered for practice.Practice and answers will checked properly.

Call and Put Options Use the information in the following table to answer questions A and B. (Assume options can be exercised prior to expiry date). December, 2017, Sydney Ltd Last share (sale) price = $31.00 Strike Price Jun July August Call 0 tions $35.00 $1 $2 $2.5 Put Options $26.00 5120 $3.5 52 Required.- A. Suppose you buy 400 Jun $35.00 call contracts. How much will you pay, ignoring commissions? Assume Sydney share price is $41 any day prior to expiry date, then what is your net gain. B. Suppose you buy 20 July put contracts. What is your maximum net gain? On the expiration date, Sydney Share is selling for $16.00 per share. What is your options worth? Share and Bond Valuation 1. Company A's capital structure contains 30% debt and 70% equity, whereas Company B's capital structure contains 40% debt and 60% equity. Both companies pay 10% interest rate on their debt. The shares of company A have a beta 1.3 and the shares of company B have a beta 1.2, the risk- tree rate on the economy is 3% and the expected return on the market is 9%. Using the above information, calculate the following: a. Cost of equity for Company A and Company B. b. WACC for company A. c. WACC for company B. Tax rate of 30% 2. Jim Ltd.'s next dividend will be $4, the dividend is expected to grow at 8% p.a., for the following 4 years. After that the growth rate in dividends will be 4% per year indefinitely. Required rate of return is 10% p.a. Required: Calculate the current value of Jim Ltd.'s shares