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Jared Lazarus has just been named the new chief executive officer of BluBell Fitness Centers, Inc. In addition to an annual salary of $542,500, his three-year contract states that his compensation will include 37,750 at-the-money European call options on the company's stock that expire in three years. The current stock price is $26 per share and the standard deviation of the returns on the firm's stock is 60 percent. The company does not pay a dividend. Treasury bills that mature in three years yield a continuously compounded interest rate of 4.2 percent. Assume that the annual salary payments occur at the end of the year and that these cash flows should be discounted at a rate of 14 percent.
Use the Black-Scholes model to calculate the value of the stock options. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)Determine the total value of the compensation package on the date the contract is signed. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
a) Find the monthly payment under Plan I. b) Find the monthly payment under Plan II. c) Which plan should you choose? Show you reasoning.
Complete the Peso/ U.S. Dollar row in Table-1 and explain your methodology. If you agree to pay 2-million pesos for 100,000 tablets at today's spot rate, how much would you pay in U.S. dollars?
A leading broker has advertised money multiplier certificates that will triple your money in nine years; that is if you buy one for $333.33 today, it will pay you $1,000 at the end of nine years. What rate of return will you earn on these money mu..
Barry's Steroids Company has $1,000 par value bonds outstanding at 12 percent interest. The bonds will mature in 50 years.
Stillwater Hospital is borrowing $1,000,000 for its medical office building. The annual interest rate is 5%. What will be the monthly payments on the loan if the length of the loan is four years and payments occur at the end of each year? Show you..
Assume that Atlas Sporting Goods, Inc., has $800,000 in assets. If it goes with a low-liquidity plan for the assets, it can earn a return of 15 percent.
build the income statement and balance sheet for cando inc. based on the information given belowaccounts
What are the principles of multiunit finance?
an insurance firm agrees to pay you 3310 at the end of 20 years if you pay premiums of 100 per year at the end of
Provide a brief background and summary of the potential corporate partner in terms of its history, product lines, and geographic reach
2. You purchase a bond for $875. It pays $80 a year (that is, the semiannual coupon is 4%), and the bond matures after 10 years. What is the yield to maturity?
Do you think picking a loan or investment should be based solely on the potential interest earned/paid? What else should be considered when taking out a loan?
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