WOP Part II. Answer the below questions and show all 1. Answer the below questio
ID: 2807015 • Letter: W
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WOP Part II. Answer the below questions and show all 1. Answer the below question based upon the following information on Fitbit: Yeari earo $5,000,000 Fitbit RaF RM Investment Banking Fee or Floating Rate 2% 9% Initial Investment Units of Sales Price per Unit 150,000 $400 7% $250 $1,000,000 $1,500,000 Variable Cost per Unit Existing Fitbit Shares Neurio 2,000,000 Fixed Cost 36,500,000 $91,100,000 Depreciation Shares Pre-IPO Value 35% Tax Rate What is the price per share for the Fitbit IPO? Orange Inc. has a capital budget of $1.5 million. The company is forecasting a target capital structure of 60% debt and 40% equity. The company is forecasting net income of $750,000. If the company follows a residual distribution model and pays all distributions as dividends what will be the company's payout ratio? 2. 3. Use the Black-Scholes formula to value the following options: A call option written on a stock selling for $60 per share with a $60 exercise price. The stock's standard deviation is 6% per month. The option matures in three months and the risk-free rate is 1% per month. A. A put option written on the same stock as described in (a) above, at the same time, with the same stock price, exercise price, risk-free rate, and expiration date. B.Explanation / Answer
Under the residual distribution system,
Dividend = Net income - Equity portion of the capital budget
Dividend = 750,000 - 15,000,000*40% = 750,000 - 600,000 = 150,000
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