Long 1 lot Syarikat XYZ stock @ RM 15Long 1, 3-month Syarikat XYZ put @ RM 0.15 Stock Price of maturity Value of long stock position Profit/loss to Long Put position @ 0.15 Value of combined position at maturity 10 -5000 4850 -150 11 -4000 3850 -150 12 -3000 2850 -150 13 -2000 1850 -150 14 -1000 850 -150 15 0 -150 -150 16 1000 -150 850 17 2000 -150 1850 18 3000 -150 2850 19 4000 -150 3850 20 5000 -150 4850 1. Based on table above Draw the combined position graph and calcuate the: a. Max loss b. Max Profit c. Break even point
Cost of Capital
Shareholders and investors who invest into the capital of the firm desire to have a suitable return on their investment funding. The cost of capital reflects what shareholders expect. It is a discount rate for converting expected cash flow into present cash flow.
Capital Structure
Capital structure is the combination of debt and equity employed by an organization in order to take care of its operations. It is an important concept in corporate finance and is expressed in the form of a debt-equity ratio.
Weighted Average Cost of Capital
The Weighted Average Cost of Capital is a tool used for calculating the cost of capital for a firm wherein proportional weightage is assigned to each category of capital. It can also be defined as the average amount that a firm needs to pay its stakeholders and for its security to finance the assets. The most commonly used sources of capital include common stocks, bonds, long-term debts, etc. The increase in weighted average cost of capital is an indicator of a decrease in the valuation of a firm and an increase in its risk.
Long 1 lot Syarikat XYZ stock @ RM 15Long 1, 3-month Syarikat XYZ put @ RM 0.15
|
Stock Price of maturity |
Value of long stock position |
|
Value of combined position at maturity |
|
10 |
-5000 |
4850 |
-150 |
|
11 |
-4000 |
3850 |
-150 |
|
12 |
-3000 |
2850 |
-150 |
|
13 |
-2000 |
1850 |
-150 |
|
14 |
-1000 |
850 |
-150 |
|
15 |
0 |
-150 |
-150 |
|
16 |
1000 |
-150 |
850 |
|
17 |
2000 |
-150 |
1850 |
|
18 |
3000 |
-150 |
2850 |
|
19 |
4000 |
-150 |
3850 |
|
20 |
5000 |
-150 |
4850 |
1. Based on table above Draw the combined position graph and calcuate the:
a. Max loss
b. Max Profit
c. Break even point
Step by step
Solved in 6 steps with 4 images
