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The rate of return in Options 1 and 2 is less than what is offered in option 3 at the end of eight years.
B. Future Value to the Present
Option 1: $10,000 now; PV=$10,000
Option 2: $2,000 at 11% in 8 years
2,000 x 5.146 = $10,292
$2,000 at 12% in 8 years
2,000 x 4.968 = $9,936
Option 3: $24,000 in 8 years, to present value, at 11%
24,000 x 0... displayed 300 characters
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The rate of return in Options 1 and 2 is less than what is offered in option 3 at the end of eight years.
B. Future Value to the Present
Option 1: $10,000 now; PV=$10,000
Option 2: $2,000 at 11% in 8 years
2,000 x 5.146 = $10,292
$2,000 at 12% in 8 years
2,000 x 4.968 = $9,936
Option 3: $24,000 in 8 years, to present value, at 11%
24,000 x 0... displayed next 300 characters
By putting a down payment of just over $100,000 and taking an operating lease makes the most business sense for Bonnesante.
In the third scenario, in the sixth year, Bonnesante needs to acquire manufacturing capacity as well as deal with a cash flow crisis that needs immediate attention...
(Savings) -16250 -16250
Net Incremental Cost -865 935
OPTION B COMPARED TO OPTION C
Manufacturing Maintenance
Option B ? ?
Option C ? ?
? : In-house
? : Outsourced
Only maintenance department; salary of foreman, laying-off of Walters, opportunity cost of warehouse lost due to maintenance work
Incremental annual cost of Option B compared to Option C (Pounds Sterling)
Period< 4 years Period > 4 Years
Materials 660 740
Labor 700 700
Foreman’s salary 500 500
Rent of warehouse 850 850
Other expenses 650 650
Total 3360 3440
Payment to Packages Ltd...
Conversely had the dollar continued to appreciate and the option was exercised, it would have to move to 3.8. Given this spread, the forward provided the safer bet with a better overall return given the speculation the dollar would actually drop rendering an option useless...
Option 2 seems to give the best combination of revenue enhancement while maximizing overall profitability. Profits in year two and forward are almost $1 million better than than the next best alternative...
Ex: buy a call option for 10 in July (exercised price). The current stock price is 9. In July the stock is worth 15. Exercise
the option, and the buyer will be able the buy the stock for 10...
The rate of return in Options 1 and 2 is less than what is offered in option 3 at the end of eight years.
B. Future Value to the Present
Option 1: $10,000 now; PV=$10,000
Option 2: $2,000 at 11% in 8 years
2,000 x 5...
Reyes, once listed on the Forbes 400 list, now faces 20 years in prison and a $5 million fine.(2)”
Sources:
(1) http://news.cnet.com/FAQ-Behind-the-stock-options-uproar/2100-1014_3-6098457...