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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 $597,500, his three-year contract states that his compensation will include 15,750 at-the-money European call options on the company's stock that expire in three years. The current stock price is $33 per share and the standard deviation of the returns on the firm's stock is 55 percent. The company does not pay a dividend. Treasury bills that mature in three years yield a continuously compounded interest rate of 5.2 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 11 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.
Your firm has an ROE of 12%, a payout ratio of 25%, $700,000 of stockholders' equity, and $300,000 of debt. If you grow at your sustainable growth rate
The imputed smartness measure is a linear combination of demographic characteristics. If investors are sorted using each of these demographic characteristics.
Unisonic Company had sales recenues for the year of $1,750. Average working capital; property, plant, and equipment; and shareholders' equity were $250, $525, and $1,500, respectively. (All figures are millions.) Required: (a) Working capital turnocv..
Which of the following observations provide evidence against the strong form of the efficient market theory? Please provide reasons for your answer. (For each statement, please indicate whether it provides evidence for or against the strong form ..
Company ABC received a contract from company XYZ, worth $460 million to build a product. XYZ will pay $50 million when the contract is signed.
You are to provide the missing closing entry. For each journal entry write DR for debit and CR for credit.
Discuss how the rise of fundamentalism among the world's major religions might challenge traditional notions of state sovereignty.
What is the impact the global market has on the current business environment?
How do we go about developing an investment portfolio for a given individual? What questions should we ask? Where do we start?
A $2,300 face value corporate bond with a 5.60 percent coupon (paid semiannually) has 12 years left to maturity. It has had a credit rating of BB and a yield.
The project will produce ?$110,000 of depreciation per year. In? addition, the project will cause the following changes in year? 1:
a. What is this project's NPV? Accept or reject? b. Calculate this project's Profitability Index. Accept or reject?
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