Exam 14: Security Structures and Determining Enterprise Values

Which of the following provides the option to transform preferred stock into common stock?

The Black and Scholes model requires the stock price as an input.

Owning a put option on a stock is the same as selling a call option on that same stock.

Piggyback registration rights allow holders of convertible securities to "vote as if converted."

Which of the following is an example of a call option that is "in the money"?

The right to sell a specified asset at a specified price up until a specified date is called a(n):

Convertible debt can have all of the following characteristics except :

An option that can be exercised at any time until its expiration is called a(n):

If a share of preferred stock has a $10 par value, and the stock has a 2:1 conversion ratio, then the conversion price would be $5.

An option that can be exercised only at a specific set of dates is called a(n):

An option is a right to buy or sell additional shares of stock.

Registration rights embedded in a venture's securities grant certain classes of shareholders the right, under certain circumstances, to have their securities registered with the SEC.

Which of the following is not a type of option?

The right for existing owners to maintain their ownership share by purchasing sufficient shares to keep their percentage share of the firm is called:

For American and Bermudan embedded options, the exercise price can change over time as specified in the security agreement.

To calculate the enterprise valuation cash flow, one begins with which of the following items from the income statement?

The value of a warrant can be directly derived from the value of a call option.

The concept of an enterprise value is that it is the combined value of all of venture's financing, typically equity plus all of the debt.

Which of the following has the least senior claim on a venture's asset?

The enterprise method of valuation can be executed with either an after-tax or before-tax weighted average cost of capital as long as the rate is applied to the appropriate enterprise cash flows.