The current value of levered firm ABC, Inc is $100 million. Its capital structure consists of equity and pure discount debt on which a payment of $80 mn. is due in 5 years. The risk-free rate is 5%
Using the Black-Scholes Option Pricing Model, the value of the firm's equity is (i) if ?=20%, and is (i) if ?=40%. Assuming that the increase in ? was a deliberate action of the firm's management designed to expropriate wealth from bondholders to stockholders, what was the value of this expropriation?
(i) (ii) __(iii)__
a. $40.3 mn. $40.3 mn. $0
b. $33.3 mn. $50.4 mn. $17.1 mn.
c. $33.3 mn. $40.3 mn. $7.0 mn.
d. $40.3 mn. $50.4 mn. $10.1 mn.
(The BSOPM formula and values of the cumulative normal distribution function, must be supplied.)
D
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Which of the following is not a SOX requirement?
A. the CEO must certify financial statements B. Auditors must maintain an audit trail that documents all client communications C. Auditors must report specific info to company's audit committee D. Audit committee members must be on company's board of directors and indep
Apple computers are Interested in measuring productivity of all Apple's products with respect to all inputs be calculated. Keeping in mind that Apple produces a wide range of electronic products, such as, phone, laptops, smart watches, etc. with different inputs, the productivity measure calculated Is an example of single factor productivity.
a. True b. False