(A) To determine: The transaction cost of purchasing 100 IBM shared now and selling the same overa period of 6 months is optimum through one discount broker or full service broker Introduction: Cost of transaction includes the commission or brokerage fees charged by the broker over the transaction of stock.

Question

Brightwoodę Furniture provides the following financial data for a given enod: Sales Aount ($) Per Unit ($) 150,000 13 Less Variable E - L96,000 13 Contribwaon Margin c 1C Less Fixed Expenses $5,000 et Income 125,000 a. What is the company's CM ratio? b. If quarterly sales increase by $5,200 and there is no change in fixed expenses, by how much would you expect quarterly net operating income to increase?

Answer 1

Question

Chapter 3, Problem 13PS

Summary Introduction

(A)

To determine:

The transaction cost of purchasing 100 IBM shared now and selling the same overa period of 6 months is optimum through one discount broker or full service broker

Introduction:

Cost of transaction includes the commission or brokerage fees charged by the broker over the transaction of stock.

Summary Introduction

(B)

To determine:

The transaction cost of investing the amount in 6 months money call option on IBM stock as of now and selling the same after 6 months from now is optimum through one discount broker or full service brokers

Introduction:

Discount brokers stand to be the brokers that are involved in sale and purchase of stock at a discounted rate that is usually lesser than the fees or commission charged by the full service brokers. These brokers do not deal with financial planning services, their area is limited to execution of trade services

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Brightwoodę Furniture provides the following financial data for a given enod: Sales Aount ($) Per Unit ($) 150,000 13 Less Variable E - L96,000 13 Contribwaon Margin c 1C Less Fixed Expenses $5,000 et Income 125,000 a. What is the company's CM ratio? b. If quarterly sales increase by $5,200 and there is no change in fixed expenses, by how much would you expect quarterly net operating income to increase?

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