Exam 24: Options and Corporate Finance: Extensions and Applications

Ima Greedy, the CFO of Financial Saving Techniques has been granted options on 200,000 shares. The stock is currently trading at $22 a share and the options are at the money. The volatility of the stock has been about.20 on an annual basis over the last several years. The option mature in 3 years and the risk free rate is 4%. What is the value of a call option?

(Multiple Choice)

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Question 21

The Nu-Tech Company has a new project available to it at a cost of $6 million. The project that they can sell 13,000 personal organizers at $172 in net cash flow for each of the next five years. Nu-Tech's discount rate is 15%. What is the NPV of the investment? The executives of Nu-Tech are concerned about the potential of future competition and a subsequent drop in sales and price. If after two year you can dispose of the asset for 1.0 million at what price would it make sense to abandon the project?

(Essay)

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Question 22

Ima Greedy, the CFO of Financial Saving Techniques has been granted options on 200,000 shares. The stock is currently trading at $22 a share and the options are at the money. The volatility of the stock has been about.20 on an annual basis over the last several years. The option mature in 3 years and the risk free rate is 4%. Calculate N(d₂).

(Multiple Choice)

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Question 23

Options are granted to top corporate executives because:

(Multiple Choice)

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Question 24

Showing 21 - 24 of 24

Options are granted to top corporate executives because:

Introduction to Corporate Finance

Accounting Statements and Cash Flow

Financial Planning and Growth

Financial Markets and Net Present Value: First Principles of Finance

The Time Value of Money

How to Value Bonds and Stocks

Net Present Value and Other Investment Rules

Net Present Value and Capital Budgeting

Risk Analysis, Real Options, and Capital Budgeting

Risk and Return: Lessons From Market History

Risk and Return: the Capital Asset Pricing Model

An Alternative View of Risk and Return: the Arbitrage Pricing Theory

Risk, Return, and Capital Budgeting

Corporate Financing Decisions and Efficient Capital Markets

Long-Term Financing: an Introduction

Capital Structure: Basic Concepts

Capital Structure: Limits to the Use of Debt

Valuation and Capital Budgeting for the Levered Firm

Dividends and Other Payouts

Issuing Equity Securities to the Public

Long-Term Debt

Leasing

Options and Corporate Finance: Basic Concepts

Warrants and Convertibles

Derivatives and Hedging Risk

Short-Term Finance and Planning

Cash Management

Credit Management

Mergers and Acquisitions

Financial Distress

International Corporate Finance

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