Exhibit 20 -Refer to Exhibit 20

question 80

Multiple Choice

Exhibit 20.7
Use the Information Below for the Following Problem(S)
The current stock price of Zanco Corporation is $50. Zanco Corporation has the following put and call option prices with exercise prices at $45 and $50.
$$\begin{array} { c c c } \text { Exprcisp Price } & \text { Put Price } & \text { Call Price } \\\$ 45 & \$ 1.50 & \$ 6.75 \\\$ 50 & \$ 3.75 & \$ 4.25\end{array}$$
-Refer to Exhibit 20.7.The time premium for the call option with a $50 exercise price is

• A) $0.00
• B) $1.50
• C) $1.75
• D) $4.25
• E) $9.25

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Definitions:

Straight-Line Depreciation

A method of allocating the cost of a tangible asset over its useful life in equal annual amounts, making the expense predictable and consistent.

Income Taxes

Taxes levied by governments on individuals' or businesses' net income, where the amount owed varies based on the level of the income earned.

Operating Cash Inflow

Cash generated from a company's primary business operations, excluding non-operational sources like investments or financing.

Capital Budgeting

The process of evaluating and selecting long-term investments that are in line with the goal of maximizing a firm's value through strategic asset allocation.