Problem No. 1 on Options based on Chapter 8 A Call Option on the stock of XYZ Company has a market price of $9.00. The price of the underlying stock is $36.00‚ and the strike price of the option is $30.00 per share. What is the Exercise Value of this Call Option? What is the Time Value of the Option? EV = $36.00 - $30.00 = $6 EV = $6.00 TV = $9.00 - $6.00 = $3.00 TV = $3.00 Problem No. 2 on Options based on Chapter 8 The Exercise (Strike) Price on ABC Company’s Option is $21.00‚ its
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19-29 Diluted Earnings per Share 30-63 Earnings 33-35 Shares 36-40 Dilutive Potential Ordinary Shares 41-63 Options‚ warrants and their equivalents 45-48 Convertible instruments 49-51 Contingently issuable shares 52-57 Contracts that may be settled in ordinary shares or cash 58-61 Purchased options 62 Written put
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the amount of debt it has. Option Pricing Theory Can find the value of an option. Shares are a call option on the firm’s assets. 3 Two concepts Equilibrium Equilibrium prices: those at which‚ on average‚ the number of buyers at that price equals the number of sellers. Arbitrage Two portfolios having identical cashflows (with identical risk) must have identical value. Otherwise one may arbitrage between them. CAPM is an equilibrium theory. Option valuation relies on arbitrage
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000 “at-the-money” employee share options on January 1‚ 2006. The awards have a grant-date fair value of $6‚ vest at the end of the third year of service (cliff-vesting)‚ and have an exercise price of $21. Subsequent to the awards being granted‚ the stock price has fallen significantly. On January 1‚ 2008‚ Murray decreased the exercise price on the stock options to $12. This downward adjustment to the exercise price was made in order to ensure that the options continue to provide intended motivation
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Black-Scholes Option Pricing Model Nathan Coelen June 6‚ 2002 1 Introduction Finance is one of the most rapidly changing and fastest growing areas in the corporate business world. Because of this rapid change‚ modern financial instruments have become extremely complex. New mathematical models are essential to implement and price these new financial instruments. The world of corporate finance once managed by business students is now controlled by mathematicians and computer scientists
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Contents Chapt~ 1 ExJ>ected Utilicy and Risk Aversion ..............................................................................• ! Chapt€11" 2 Mean-Varian.ce Analysis ................................................................................................ 6 Chapter 3 CAPM‚ Atbitmge‚ and Linear Factor Models .............................................................. 12 Chapter 4 Consumption-Savings Decisions and State Pricing............................................
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employee stock options as required by FASB Statement 123(R). The issue presented is whether expensing employee stock options under fair value rules accurately reflect the company’s true financial condition and what would be an appropriate way to assess the company’s performance when valuing the its stock. Case Data Maxim Integrated Products‚ Inc. designs‚ develops‚ manufactures‚ and markets a broad range of linear and mixed-signal integrated analog circuits. It. granted stock options to its employees
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offered to key employees should at or above the market price‚ because the stock-option plan should be attractive to these employees. 3. I think the price might be below‚ equal‚ or above the market price. The length of time would be longer than the other two kinds of warrants. The length of time will increase as long as the exercise price increases. c. 1. Include a description of the stock being offered for sale; the option price; the time period during which the rights may be exercised; and the number
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UVA-F-0745 DOZIER INDUSTRIES (A) Richard Rothschild‚ the chief financial officer of Dozier Industries‚ returned to his office after meeting with two officers of Southeastern National Bank. He had requested the meeting to discuss financial issues related to Dozier’s first major international sales contract‚ which had been confirmed the previous day‚ January 13‚ 1986. Initially‚ Rothschild had contacted Robert Leigh‚ a vice president of the bank‚ who had primary responsibilities for Dozier’s
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Dozier Industries Case On January 13‚ 1986 Dozier Industries‚ an American based firm‚ received notice that a bid on a project in the United Kingdom had been accepted. The project was to bring in £1‚175‚000 in revenue. Therefore‚ the revenue received for this project will need to be transferred into US dollars. When Dozier issued the bid on December 3‚ 1985 the project the exchange rate was $1.4820/£. This rate would have provided Dozier with the desired 6% profit on the project. On January
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