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A company has granted 20,000 option to its executives. The stock price and strike price are both $30. The options last for 15 years and vest after 5 years. The company decides to value the options using an expected life of 6 years and a volatility of 20% per annum. The company pays no dividends and the risk-free rate is 4%. The company accountant use Black-Scholes formula to find fair value of the options and he calculated d1 as 0.74 and find value of N(d1) as 0.7704. What will the company report as an expense for these option om its income statment?
Imagine you inherited $50,000 and you want to invest it to meet two financial goals: (a) to save for your wedding, which you plan to have in two years, and (b) to save for your retirement a few decades from now. How would you invest the money?
Frozen Yogurt Palace has 370,000 shares of stock outstanding with a current market value of $37.00 a share. You own 48,000 of those shares. Next month the election will be held to select four new members to the board of directors.
The weighted-average cost of capital for a firm with a 65/35 debt/equity split, 8% pre-tax cost of debt, 15% cost of equity, and a 35% tax rate would be: What is the pretax cost of debt for a firm in the 35% tax bracket that has a 10% aftertax cost o..
You likely have read about the Sarbanes-Oxley Act. Why do you suppose Congress passed this law? In your opinion, is the law providing any benefit for the average investor? Do you think if we have enough such laws, it will eventually be impossible ..
Note: Include a link to this BSC if available.Explain how useful you think the BSC is as a form of performance measurement and management for this particular organisation.
What is the expected rate of return on a portfolio Which consists of $9,000 invested in an S&P 500 Index fund, $32,500 in a technology fund, and $8,500 in Treasury Bills. The expected rate of return is 11% on the S&P Index fund, 14% on the technology..
Four economic classifications of mergers are (1) horizontal, (2) vertical, (3) conglomerate, and (4) congeneric. Explain the significance of these terms in merger analysis with regard to:
Cool Shoes (CS) had 2014 sales of $518 million. You expect sales to grow at 9% next year(2015), but, decline by 1% per year after until you settle to a long -run growth rate of 4%. You expect EBIT to be 9% of sales, increases in net working capital r..
Scanlin, Inc., is considering a project that will result in initial after tax cash savings of $1.86 million at the end of the first year, and these savings will grow at a rate of 2 percent per year indefinitely. What is the maximum initial cost the c..
The Muse Co. just issued a dividend of $ 2.75 per share on its common stock. The company is expected to maintain a constant 5.8 percent growth rate in its dividends indefi nitely. If the stock sells for $ 59 a share, what is the company’s cost of equ..
XYZ Corporation issued a 30 year, 7% annual coupon bond five years ago. The current yield to maturity of bonds with similar risk is 6% annually. Assume that the bond was issued at par value ($1,000). What is the current price of the bond? Is it tradi..
A new machine costs $30,000, and as operating costs of $5,000 per year. Its salvage value after its 7-year life is $8,000. Assuming an interest rate of 10% per year, which of the following is closest to its capitalized cost?
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