18 lines
945 B
Plaintext
18 lines
945 B
Plaintext
Notes • 303
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Appendix B
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1. The idea behind this process is to match the timing of the costs of
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equipment with revenues from the items produced with that equip-
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ment. This is a key principle of accountancy called matching.
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2. The problem is that troughs, by definition, follow peaks. Usually, just
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like the timing of large acquisitions, companies decide to spend huge
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amounts to build new production capacity at just about the same time
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that economic conditions peak, and the factories come online just as
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the economy is starting to sputter and fail.
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Appendix C
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1. A penny saved is a penny earned. We can think of the option being
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cheaper by the amount of the dividend, so we will place the amount
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that we save on the call option in savings.
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2. This is calculated using the following equation:
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Interest = strike × r × percent of 1 year
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In the case of the $18 strike, interest = 18 × 0.14% × (373 days/365 days
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per year) = $0.03. |