Question 1

Options are granted to top corporate executives because:

Accepted Answer

A)  executives will make better business decision 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 the choices are correct. 
A)  executives will make better business decision 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 the choices are correct.

Question 2

The call option on a dividend paying stock compared to a non-dividend paying stock is:

Accepted Answer

A)  more valuable because of the extra dividend payment. 
B)  equal in value because cash dividends are paid on stock. 
C)  less valuable because cash dividends are paid on stock. 
D)  less valuable if the dividend paying stock is in-the-money while the non-dividend paying stock if out-of-the-money. 
A)  more valuable because of the extra dividend payment. 
B)  equal in value because cash dividends are paid on stock. 
C)  less valuable because cash dividends are paid on stock. 
D)  less valuable if the dividend paying stock is in-the-money while the non-dividend paying stock if out-of-the-money.

Question 3

The NPV approach must be:

Accepted Answer

A)  augmented by added analysis if there are a few embedded options. 
B)  augmented by added analysis if a decision has significant embedded options. 
C)  jettisoned if there are any embedded options. 
D)  computed carefully to identify the options. 
A)  augmented by added analysis if there are a few embedded options. 
B)  augmented by added analysis if a decision has significant embedded options. 
C)  jettisoned if there are any embedded options. 
D)  computed carefully to identify the options.

Question 4

What is the value of a call option?

Accepted Answer

A)  $3.14 
B)  $5.86 
C)  
C) $4.26 
D)  $5.62 
E)  $6.16 
A)  $3.14 
B)  $5.86 
C)  
C) $4.26 
D)  $5.62 
E)  $6.16

Options are granted to top corporate executives because:

The call option on a dividend paying stock compared to a non-dividend paying stock is:

The NPV approach must be:

What is the value of a call option?

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

Filters

Exam 24: Options and Corporate Finance: Extensions and Applications

Options are granted to top corporate executives because:

The call option on a dividend paying stock compared to a non-dividend paying stock is:

The NPV approach must be:

What is the value of a call option?

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

Filters