Applications of option pricing in corporate finance Option pricing is used in four major areas of corporate finance: • Real Options Suppose a company has a 1-year proprietary license to develop a software application for use in a new generation of wireless cellular telephones. Hiring programmers and marketing consultants to complete the project will cost $30 million. The good news is that if consumers love the new cell phones‚ there will be a tremendous demand for the software. The bad news
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Department of Finance‚ HKUST Spring 2013 Email: Xuewenliu@ust.hk Office hour: 13:30-14:30 Tuesday Assessment: Assignments (12%)‚ Midterm-exam (18%)‚ Projects and presentations (15%)‚ and Final exam (55%) Textbooks: 1. Corporate Finance‚ by J. Beck and P. DeMarzo‚ 2nd edition 2011‚ Pearson Education‚ Inc. Hereafter BD. 2. Financial Markets and Corporate Strategy‚ by M. Grinblatt and S. Titman‚ 2nd edition‚ 2002‚ Irwin McGraw Hill. Hereafter GT. I. Introduction to Corporate Finance 1. Corporations
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ANALYSIS OF USEC Inc.‚ Prepared For: Dr. Doina Chichernea BUAD 6200 SPRING 2011 The University of Toledo APRIL 21‚ 2011 Executive Summary USEC is the world’s leading supplier of enriched Uranium to nuclear power plants. Due to the expiration of long term energy cost savings contracts‚ USEC is examining the possibility of taking on a new project called the American Centrifuge Project. This project will utilize a different process for Uranium enrichment‚ which is the core business process
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Choose Alpha. 7. 1‚ 2‚ 4‚ and 6 8. a. b. Payback A = 1 year Payback B = 2 years Payback C = 4 years c. A and B d. The present value of the cash inflows for Project A never recovers the initial outlay for the project‚ which is always the case for a negative NPV project. The present values of the cash inflows for Project B are shown in the third row of the table below‚ and the cumulative net present values are shown in the fourth row: C0 C1 C2 C3 C4 C5 -2‚000.00 +1‚000.00 +1‚000.00 +4‚000
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CASESTUDY: Goodweek Tires‚ Inc. After extensive research and development‚ Goodweek Tires‚Inc.‚ has recently developed a new tire‚ the SuperTread‚ and must decide whether to make the investment necessary to produce and market the SuperTread. The tire would be ideal for drivers doing a large amount of wet weather and off-road driving in addition to its normal freeway usage. The research and development costs so far total about $10 million. The SuperTread would be put on the market beginning this year
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Why has Wal-Mart viewed international expansion as a critical part of its strategy? Wal-Mart has viewed international expansion as a critical part of its strategy because of a number of reasons. First‚ Wal-Mart saw the potential for increased profits and sales in new markets.“After rapid expansion during the 1980s and 1990s‚ Wal-Mart faces limits to growth in its home market and has been forced to look internationally for opportunities”(Ball‚ 2007). Second‚ Wal-Mart saw the need “to protect their
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SCHOOL OF ECONOMICS‚ FINANCE & MARKETING CORPORATE FINANCE MID SEMESTER TEST FIRST SEMESTER 2008 – Part-time STUDENT DETAILS (Please Print Clearly) Family Name: ___________________________________________________________ First Name: _____________________________________________________________ Address: _______________________________________________________________ Tel. No: (BH) ___________________________________________________________ Student Number: _________________________________________________________
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concerned with curiosity‚ innovative thinking‚ assimilating new information‚ and open to new experiences. It describes a person’s personality. In the mini cases study Ann Fudge decided that after working 24 years in corporate America‚ she was going to take some time off to figure out her life and have some time to herself. During her time away from corporate America‚ Fudge traveled to different countries to visit and embark on some new experiences. People with this personality trait enjoy traveling to
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Wenyu Li BUS 581 03/01/2015 Chapter 7 MINI CASE Your employer‚ a mid-sized human resources management company‚ is considering expansion into related fields‚ including the acquisition of Temp Force Company‚ an employment agency that supplies word processor operators and computer programmers to businesses with temporary heavy workloads. Your employer is also considering the purchase of a Biggerstaff & Biggerstaff (B&B)‚ a privately held company owned by two brothers‚ each with 5 million shares of stock
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Case Questions for MGM 828‚ Fall 2012 Case 1: The Euro in Crisis a) Evaluate the European Central Bank’s (ECB) response to the financial crisis of 2008-2010. What was their analysis of the problem? b) The ECB responded less aggressively than the US Federal Reserve to the crisis. Why? c) In May 2010‚ should the ECB agree to purchase Greek sovereign debt? Case 2: Foreign Ownership of US Treasury Securities a) Why is foreign ownership of US Treasury securities rising? It is more interesting
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