Question 1

If real options were not included in calculations of value,would the valuation be under or over-valued and why?

Accepted Answer

An option is the right,but not the requi

Question 2

If a project has optionality:

Accepted Answer

A)  the shorter the available life of the project the less valuable the project is. 
B)  the longer the available life of the project the less valuable the project is. 
C)  the shorter the available life of the project the more valuable the project is. 
D)  available project life does not change optionality. 
E)  None of these. 
A)  the shorter the available life of the project the less valuable the project is. 
B)  the longer the available life of the project the less valuable the project is. 
C)  the shorter the available life of the project the more valuable the project is. 
D)  available project life does not change optionality. 
E)  None of these.

Question 3

The equal rate of price change from each subsequent up state and fixed rate price change from each subsequent down state are reasonable if:

Accepted Answer

A)  there is a constant variability. 
B)  any new information impacting prices is similar period to period. 
C)  interest or discount rates are constant. 
D)  Both there is a constant variability and interest or discount rates are constant. 
E)  Both there is a constant variability and any new information impacting prices is similar period to period. 
A)  there is a constant variability. 
B)  any new information impacting prices is similar period to period. 
C)  interest or discount rates are constant. 
D)  Both there is a constant variability and interest or discount rates are constant. 
E)  Both there is a constant variability and any new information impacting prices is similar period to period.

Question 4

Options are granted to top corporate executives because:

Accepted Answer

A)  executives will make better business decisions in line with benefiting the shareholders. 
B)  executive pay is at risk and linked to firm performance. 
C)  options are tax-efficient and taxed only when they are exercised. 
D)  All of these. 
E)  None of these. 
A)  executives will make better business decisions in line with benefiting the shareholders. 
B)  executive pay is at risk and linked to firm performance. 
C)  options are tax-efficient and taxed only when they are exercised. 
D)  All of these. 
E)  None of these.

Question 5

Note: Correct answers to later questions are dependent on correct answers to earlier questions.
-Ima Greedy,the CFO of Financial Saving Techniques has been granted options on 200,000 shares. The stock is currently trading at $23 a share and the options are at the money. The variance of the stock has been about .08 on an annual basis over the last several years. The options mature in 3 years and the risk free rate is 4%.
Calculate N(d2).

Accepted Answer

A)  .5000 
B)  .5988 
C)  .6164 
D)  .7468 
E)  .7595 
A)  .5000 
B)  .5988 
C)  .6164 
D)  .7468 
E)  .7595

Question 6

Investing in a negative NPV project today is a feasible choice if:

Accepted Answer

A)  there are future option alternatives. 
B)  investing is sequentially limited. 
C)  the discount rate is low. 
D)  Both there are future option alternatives and investing is sequentially limited. 
E)  Both there are future option alternatives and the discount rate is low. 
A)  there are future option alternatives. 
B)  investing is sequentially limited. 
C)  the discount rate is low. 
D)  Both there are future option alternatives and investing is sequentially limited. 
E)  Both there are future option alternatives and the discount rate is low.

If real options were not included in calculations of value,would the valuation be under or over-valued and why?

If a project has optionality:

The equal rate of price change from each subsequent up state and fixed rate price change from each subsequent down state are reasonable if:

Options are granted to top corporate executives because:

Investing in a negative NPV project today is a feasible choice if:

Introduction to Corporate Finance

Financial Statements and Cash Flow

Financial Statements Analysis and Financial Models

Discounted Cash Flow Valuation

Net Present Value and Other Investment Rules

Making Capital Investment Decisions

Risk Analysis, Real Options, and Capital Budgeting

Interest Rates and Bond Valuation

Stock Valuation

Risk and Return: Lessons From Market History

Return and Risk: the Capital Asset Pricing Model Capm

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

Risk, Cost of Capital, and Valuation

Efficient Capital Markets and Behavioral Challenges

Long-Term Financing

Capital Structure: Basic Concepts

Capital Structure: Limits to the Use of Debt

Valuation and Capital Budgeting for the Levered Firm

Dividends and Other Payouts

Raising Capital

Leasing

Options and Corporate Finance

Warrants and Convertibles

Derivatives and Hedging Risk

Short-Term Finance and Planning

Cash Management

Credit and Inventory Management

Mergers, Acquisitions, and Divestitures

Financial Distress

International Corporate Finance

Filters

Exam 23: Options and Corporate Finance: Extensions and Applications

If real options were not included in calculations of value,would the valuation be under or over-valued and why?

If a project has optionality:

The equal rate of price change from each subsequent up state and fixed rate price change from each subsequent down state are reasonable if:

Options are granted to top corporate executives because:

Investing in a negative NPV project today is a feasible choice if:

Introduction to Corporate Finance

Financial Statements and Cash Flow

Financial Statements Analysis and Financial Models

Discounted Cash Flow Valuation

Net Present Value and Other Investment Rules

Making Capital Investment Decisions

Risk Analysis, Real Options, and Capital Budgeting

Interest Rates and Bond Valuation

Stock Valuation

Risk and Return: Lessons From Market History

Return and Risk: the Capital Asset Pricing Model Capm

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

Risk, Cost of Capital, and Valuation

Efficient Capital Markets and Behavioral Challenges

Long-Term Financing

Capital Structure: Basic Concepts

Capital Structure: Limits to the Use of Debt

Valuation and Capital Budgeting for the Levered Firm

Dividends and Other Payouts

Raising Capital

Leasing

Options and Corporate Finance

Warrants and Convertibles

Derivatives and Hedging Risk

Short-Term Finance and Planning

Cash Management

Credit and Inventory Management

Mergers, Acquisitions, and Divestitures

Financial Distress

International Corporate Finance

Filters