Unformatted text preview: striking price of $45 can be purchased for $380.
The stock of Carlisle is currently selling for $46 per share.
a. Ignoring any brokerage fees or dividends, what profit or loss will Ed make if
he buys the option, and the lowest price of Carlisle, Inc., stock during the 90
days is $46, $44, $40, and $35?
b. What effect would the fact that the price of Carlisle’s stock slowly rose from
its initial $46 level to $55 at the end of 90 days have on Ed’s purchase?
c. In light of your findings, discuss the potential risks and returns from using
put options to attempt to profit from an anticipated decline in share price. Financing L. Rashid Company’s
Chemical Waste Disposal System L. Rashid Company, a rapidly growing chemical processor, needs to raise $3
million in external funds to finance the acquisition of a new chemical
waste disposal system. After carefully analyzing alternative financing sources,
Denise McMahon, the firm’s vice president of finance, reduced the financing
possibilities to three alternatives: (1) debt, (2) debt with warrants, and (3) a
financial lease. The key terms of each of these financing alternatives follow.
Debt The firm can...
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This document was uploaded on 01/19/2014.
- Fall '13