Suppose the Current Share Price of Dimension Stock Is $46

question 8

Multiple Choice

Suppose the current share price of Dimension stock is $46. One year from now, this stock will sell for either $38 or $52 a share. T-bills currently yield 3.3 percent. What is the per share value of a Dimension call option if the exercise price is $40 per share and the expiration is one year from now?

• A) $7.90
• B) $8.48
• C) $12.00
• D) $10.39
• E) $13.62

---

Definitions:

Taxable Income

The amount of income used to calculate how much tax an individual or a company owes to the government in a specific period.

Inventory Cost Flow Assumptions

Assumptions made about how inventory costs move through a company's financial statements, including FIFO (First-In, First-Out), LIFO (Last-In, First-Out), and weighted average cost methods.

Descriptive Statements

Statements that provide detailed information or explanation about a specific topic, often used in documentation or reporting.

LIFO

Last In, First Out, an inventory valuation method that assumes goods purchased last are the first ones sold, affecting the cost of goods sold and inventory valuation.