BUG's Stock Price S Is $50 Today

question 3

Multiple Choice

BUG's stock price S is $50 today.It pays a dividend of $0.25 after two months and $0.30 after five months.If the continuously compounded interest rate is 4 percent per year,then the forward price of a six-month forward contract on BUG is:

• A) $49.75
• B) $50
• C) $50.46
• D) $50.76
• E) None of these answers are correct.

Calculate the total surplus before and after a tax is imposed.

Distinguish between consumer and producer surplus before and after taxation.

Understand the concept of deadweight loss due to taxes.

Comprehend how the burden of a tax is distributed between buyers and sellers.

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Definitions:

Variable Costing

A costing method that includes only variable production costs (material, labor, and overhead) in the cost of manufactured goods, treating fixed overhead costs as period expenses.

Unit Product Cost

The total cost to produce one unit of product, including direct materials, labor, and allocated overhead.

Net Operating Income

The profit calculated after all operating expenses are subtracted from total revenue but before interest and taxes are deducted.

Ending Inventory

The total value of all inventory a company still has on hand at the end of an accounting period, including raw materials, work-in-process, and finished goods.