Corporate Finance Study Set 12

Business

Quiz 24 :

Options and Corporate Finance: Extensions and Applications

Quiz 24 :

Options and Corporate Finance: Extensions and Applications

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A financial manager who does not follow the general constraints of the NPV rule may:
Free
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B

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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(d1).
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C

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If a project has optionality:
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A

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Options are granted to top corporate executives because:
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The Alger Co. operates a bauxite mine. The mine can produce 800,000 tons a year. The mine is currently closed and will cost $12 million to open it. When should the mine be opened?
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The volatility of interest rates affect the value of the project by:
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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 d1?
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Executives cannot exercise their options for a fixed period of time, this is the:
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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?
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Which of the following is not part of the Black Scholes option pricing model?
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The call option on a dividend paying stock compared to a non-dividend paying stock is:
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Walter Maxim, the CEO of Digital Storage Devices has been granted options on 300,000 shares. The stock is currently trading at $27 a share and the options are at the money. The volatility of the stock has been about.15 on an annual basis over the last several years. The option mature in 5 years, become exercisable in 3 years, and the risk free rate is 4%. What is the value of Mr. Maxim's options?
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Corporations by rewarding executives with large option positions:
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Rejecting an investment today forever may not be a good choice because:
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Walter Maxim, the CEO of Digital Storage Devices has been granted options on 300,000 shares. The stock is currently trading at $27 a share and the options are at the money. The volatility of the stock has been about.15 on an annual basis over the last several years. The option mature in 5 years, become exercisable in 3 years, and the risk free rate is 4%. If Mr. Maxim earned $500,000 in regular annual salary why might why might he prefer to have $1,500,000 in straight salary versus salary and options?
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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 d2?
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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).
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What are the u, the up state multiplier, and d, the down state multiplier, if there are monthly intervals and the standard deviation is .38?
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The risk-neutral probabilities for an asset, with a current value equal to the present value of future payoffs are:
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The NPV approach must be:
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