Advanced Corporate Finance and Modeling – FINA0065-1 Assignment #1 – Laura Martin: Real Options and the Cable Industry 1. Consider the multiples analysis developed in Exhibits 2‚5 & 6 Please describe the method of ‘Multiples’ using case numbers and answer to the following questions: 1.1. What assumptions does this analysis rely upon? 1.2. How is Martin’s regression analysis different from/similar to traditional multiples analysis? 1.3. Do you agree with her interpretation of the regression
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Stock Option and Ethics Carol Berry ACC201 Principles of Financial Accounting Instructor: David Miller August 1‚ 2011 Stock Option and Ethics In today’s corporate world stock options makes up and is increasingly dominates CEO pay packages. CEO’s and top level executives are paid in a variety of different ways and stock options are just one of the ways that they get paid. CEO’s and executives have skills and responsibilities that allow directors of companies to pay these executives an extremely
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Sally Jameson: Valuing Stock Options in a Compensation Package By Group 10 1. If we ignore tax consideration and assume that Sally Jameson is free to sell her options at any time after she joins Telstar‚ which compensation package is worth more? First scenario‚ if Sally chooses stock options and hold until maturity date. Ignoring the taxation and other constraints‚ the future value of cash compensation at the end of the 5th year will be 5000 * (1 + 0.0602) ^ 5 = 6697.44. We can easily form the
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(a) Comparing Option price‚ time to maturity‚ and strike price: 1. Option price against Time to Maturity‚ For a given strike price: i) APOL calls (K=40) and puts (K=40) (ii) SBUX calls (K=40) and puts (K=40) (iii) ABAT calls (K=5.00) and puts (K=5.00) 2. Option price against Strike Price‚ for a given maturity: i) APOL calls and puts ii) SBUX July 2011 calls and puts iii) ABAT 2011 calls and puts: (b) Observing the effect on option price due to
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Monte Carlo Simulation in Finance for Calculating European Options Value 1. Introduction An option is a financial instrument whose value depends on a value of underlying security. Options trade started in 1973 at the Chicago Board Options Exchange (Hull‚ Fundamentals of futures and options markets 2008). Nowadays‚ options have become a crucial tool in finance; they have become valuable both for financial institutions and investors. Options are attractive to investors since they have great effect
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he real option approach to investment decision making The real option approach to investment decision making does not provide a superior alternative to traditional methods Capital investment decisions are among the most important strategic decisions a company can make. Twenty years ago‚ managers began to realise that the traditional capital spending decision techniques such as discounting cash flow (DCF) were based on estimated revenues and costs and hence not appropriate in an uncertain arena
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How to convert decimal fractions to binary in a more attractive way We all know how to convert decimal integral numbers to binary (don’t we?) by the simple method of dividing succesively by 2 and using the remainders but what happens when we are trying to convert a decimal number which has a fractional part? First we can see that it is obvious that the integral part of a decimal number will always be represented by an integral binary (with no fractional part) while the fractional part of a
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Issuing Stock Warrants to Investors: How Stock Option Warrants Work • When raising capital for a business venture‚ warrants are a common form of equity that is given to investors. A warrant is like an option - it gives the holder the right to buy a security at a fixed or formulaic price‚ which is known as the "exercise" or "strike" price. • Warrants are often confused with options. Options‚ as used in the venture capital space‚ are typically long term (up to 10 years). They are also typically
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Sally Jameson: Valuing Stock Options in a Compensation Package (Abridged) Sally Jameson‚ a second-year MBA student at Harvard Business School‚ was thrilled but confused. It was late May 1992‚ graduation was approaching‚ and she had finally landed the job of her choice. She had just finished an early morning telephone conversation with Bob Marks‚ the MBA recruiting coordinator at Telstar Communications‚ a large‚ publicly held multinational company. Mr. Mark had offered Ms. Jameson a unique position
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1973‚ Fischer Black and Myron Scholes first published the Black-Scholes Model in the paper‚ “The Pricing of Options and Corporate Liabilities”‚ published in the Journal of Political Economy. From this model‚ the Black-Scholes option pricing Model (BSM) was deduced as a means to price European options. The simplicity of the use of the BSM allowed traders to effectively price and trade options and derivatives in markets all over the world. It is still widely used today‚ although with some modifications
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