Construct profitt diagrams or profit tables on expiration to show what position in ibm puts,

calls and/or underlying stock best expresses the investor's objectives described below. as-

sume ibm currently sells for $150 so that prot diagrams/ tables between $100 and $200 (in

$10 increments) are appropriate. also assume that "at the money" puts and calls cost $15

each. (as usual, the prot calculations ignore dividends and interest.)

(a) an investor wants upside potential if ibm increases but wants (net) losses no greater

than $15 if prices decline.

(b) an investor wants to capture prots if ibm declines in price but wants a guaranteed

limited loss if prices increase.

(c) an investor wants to capture prots if ibm declines in price and is ready to accept

unlimited losses if prices increase. further, the investor wants to break even if the stock

price does not change between now and the maturity of the options.

(d) an investor wants to prot if ibm's upcoming earnings announcement is either unex-

pectedly good or disappointingly bad.

Teller co. is planning to sell 900 boxes of ceramic tile, with production estimated at 870 boxes during may. each box of tile requires 44 pounds of clay mix and a quarter hour of direct labor. clay mix costs $0.40 per pound and employees of the company are paid $12.00 per hour. manufacturing overhead is applied at a rate of 110% of direct labor costs. teller has 3,900 pounds of clay mix in beginning inventory and wants to have 4,500 pounds in ending inventory. what is the total amount to be budgeted for manufacturing overhead for the month?

Match each of the terms below with an example that fits the term. a. fungibility the production of gasoline b. inelasticity the switch from coffee to tea c. non-excludability the provision of national defense d. substitution the demand for cigarettes

Fanning company is considering the addition of a new product to its cosmetics line. the company has three distinctly different options: a skin cream, a bath oil, or a hair coloring gel. relevant information and budgeted annual income statements for each of the products follow. skin cream bath oil color gel budgeted sales in units (a) 110,000 190,000 70,000 expected sales price (b) $8 $4 $11 variable costs per unit (c) $2 $2 $7 income statements sales revenue (a × b) $880,000 $760,000 $770,000 variable costs (a × c) (220,000) (380,000) (490,000) contribution margin 660,000 380,000 280,000 fixed costs (432,000) (240,000) (76,000) net income $228,000 $140,000 $204,000 required: (a) determine the margin of safety as a percentage for each product. (b) prepare revised income statements for each product, assuming a 20 percent increase in the budgeted sales volume. (c) for each product, determine the percentage change in net income that results from the 20 percent increase in sales. (d) assuming that management is pessimistic and risk averse, which product should the company add to its cosmetics line? (e) assuming that management is optimistic and risk aggressive, which product should the company add to its cosmetics line?