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Ralph receives stock options (ISOs) with an exercise price of $16 when the stock is trading at $16. Ralph exercises these options two years after the date of the grant when the stock price is $37 per share. Which of the following statements is correct?
Ralph's adjusted basis for regular income tax will be $37 at exercise.
Ralph will have W-2 income of $21 per share upon exercise.
Ralph will have $16 of AMT income upon exercise.
Upon exercise Ralph will have no income for regular tax purposes.
In a capital budgeting context, explain how a positive NPV is evidence of an “abnormal” rate of return on a project.
Which of the following statements is incorrect regarding high quality accounting information?
An asset has had an arithmetic return of 10.9 percent and a geometric return of 8.9 percent over the last 88 years. What return would you estimate for this asset over the next 8 years? 22 years? 29 years? Enter as percentages.
What is the accumulated sum of the following stream of payments? $21,509 every year at the beginning of the year for 15 years, at 7.84 percent compounded annually.
A company has $1 million in debt and $2 million in equity. The interest rate on its debt is 5%, and the required rate of return on its equity is 15%. Its effective tax rate is 30%. What is its weighted average cost of capital (WACC)?
Analysts predict that its earnings will grow at 30% per year for the next 5 years. After that, as competition increases, earnings growth is expected to slow to 5% per year and continue at that level forever. Your company has just announced earnings o..
Senior managers at the Bank of America headquarters are concerned about the bank's performance over the last year,
Foreign exchange risk was once overlooked—perhaps thought to be of lesser overall importance—in corporate financial planning. Why should foreign exchange risk be particularly stressed in today’s corporate finance environment? Do you expect that forei..
Billy’s Exterminators, Inc., has sales of $752,000, costs of $312,000, depreciation expense of $64,000, interest expense of $42,000, a tax rate of 35 percent, and paid out $57,600 in cash dividends. The firm has 120,000 shares of common stock outstan..
Use the exponentially weighted moving-average method to obtain a multivariate volatility series for the three return series.
After making the loan's monthly installment payments for 26 months, what will be the outstanding balance?
An injection molding machine can be purchased and installed for $90,000. It is expected to be kept in service for eight years. It is believed that $10,000 can be obtained when the machine is disposed of the at the end of year eight. What are the depr..
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