All Matches

Solution Library

Expert Answer

Textbooks

Search Textbook questions, tutors and Books

Oops, something went wrong!

Change your search query and then try again

Result Not Found

Books FREE
Tutors
Study Help
Hire a Tutor
AI Study Help New

Search
Sign In
Register

study help
business
essentials corporate finance

Questions and Answers of Essentials Corporate Finance

2 What are the benefits of real option methodology over traditional methods? Why, in your opinion, do many firms not use real options to value investments? Explain. (30 marks)
3 In real options analysis, why is the binomial model preferred to Black–Scholes? Explain your answer, using a quantitative example. (30 marks)
1 You are trying to value your options. What minimum value would you assign? What is the maximum value you would assign?As a new university graduate, you have taken a management position with Exotic
2 Suppose that, in three years, the company’s equity is trading at £60. At that time should you keep the options or exercise them immediately? What are some of the important determinants in making
3 Your options, like most employee share options, are not transferable or tradable. Does this have a significant effect on the value of the options? Why?As a new university graduate, you have taken a
4 Why do you suppose employee share options usually have a vesting provision? Why must they be exercised shortly after you depart the company even after they vest?As a new university graduate, you
5 As we have seen, much of the volatility in a company’s share price is due to systematic or market-wide risks. Such risks are beyond the control of a company and its employees. What are the
5 Consider the cement example from Chapter 7. What are the real options that exist for the project? How would you incorporate these into your consultancy work? What would be the process you would
6 The important standard for executive share options is IFRS 2 Share-based Payment. Although not directly linked to real option analysis, there is an accounting standard for exploration and mining
3 Convertible bonds and warrants are like call options. However, there are some important differences:(a) Warrants and convertible securities are issued by corporations. Call options are traded
4 Many arguments, both plausible and implausible, are given for issuing convertible bonds and bonds with warrants. One plausible rationale for such bonds has to do with risk. Convertibles and bonds
5 One puzzle particularly vexes financial researchers: convertible bonds may have call provisions.Companies appear to delay calling convertibles until the conversion value greatly exceeds the call
1 Warrants What are warrants? Why are warrants sometime referred to as equity kickers? What does this mean?
2 Warrants and Options What is the primary difference between a warrant and a traded call option?Why is the dilution factor important in warrant pricing?
3 Warrants What are the advantages and disadvantages of issuing warrants?
4 Convertible Bonds What is a convertible bond? What are the key features of such a security?
6 Reasons for Buying Convertible Bonds Why might an investor buy a convertible security?
7 Conversion Policy Why will convertible bonds not be voluntarily converted to equity before expiration?When and why should a firm force conversion of convertibles?REGULAR
8 Warrants Explain the following limits on the prices of warrants:(a) If the share price is below the exercise price of the warrant, the lower bound on the price of a warrant is zero.(b) If the share
9 Convertible Bonds and Equity Volatility Assume that Barclays plc has just issued a callable convertible bond. You are concerned that the share price of Barclays is going to become more volatile
10 Convertible Bond Value Using the same bond as in problem 9, assume that you believe interest rates are going to increase. What do you think will happen to the value of the bond? What if the bond
11 Dilution What is dilution, and why does it occur when warrants are exercised?
13 Warrants and Convertibles You are employed as a financial consultant to a company that has undergone severe financial distress over the last number of years. Lacking in internal financing
14 Convertible Bonds and Financial Distress Read the paper ‘The Role of Convertible Bonds in Alleviating Contracting Costs’ in the Quarterly Review of Economics and Finance by Krishnaswami and
15 Warrant Valuation A warrant with five months until expiration entitles its owner to buy 100 shares of the issuing firm’s equity for an exercise price of €23 per share. If the current market
16 Convertible Bonds Why do you think executives believe the risk synergy rationale for issuing convertibles and not the other explanations? Explain.
17 Conversion Price A convertible bond with a face value of €1,000 has a conversion ratio of 16.4. What is the conversion price?
18 Conversion Ratio A convertible bond with a face value of SKr10,000 has a conversion price of SKr356.What is the conversion ratio of the bond?
19 Conversion Value A convertible bond has a conversion ratio of 100. If the shares are currently priced at£9.20, what is the conversion value of the bond?
20 Conversion Premium Citic Securities recently issued bonds with a face value of 100,000 renminbi and conversion ratio of 420. If the share price at the bond issue was 124 renminbi, what was the
21 Convertible Bonds Hannon Home Products recently issued £43,000,000 worth of 8 per cent convertible debentures. Each convertible bond has a face value of £100,000. Each convertible bond can be
22 Warrant Value A warrant gives its owner the right to purchase three shares of equity at an exercise price of 32 Swedish krona per share. The current market price of the equity is 39 Swedish krona.
24 Convertible Bond Value Tvep plc issued convertible bonds with a conversion price of £20. The bonds are available for immediate conversion. The current price of the company’s equity is £18 per
25 Convertible Bonds You own a callable, convertible bond with a conversion ratio of 500. The equity is currently selling for £22 per share. The issuer of the bond has announced a call at a call
26 Warrant Value General Modems has five-year warrants that currently trade in the open market. Each warrant gives its owner the right to purchase one share of equity for an exercise price of
27 Convertible Bonds Trichet SA has just issued a 30-year callable, convertible bond with a coupon rate of 7 per cent annual coupon payments. The bond has a conversion price of €125. The
28 Convertible Bonds Rob Stevens is the chief executive officer of Isner Construction plc and owns 500,000 shares. The company currently has 4 million shares and convertible bonds with a face value
30 Warrants The capital structure of Ricketti Enterprises plc consists of 10 million shares of equity and 1 million warrants. Each warrant gives its owner the right to purchase one share of equity
31 Convertible Calculations You have been hired to value a new 25-year callable, convertible bond.The bond has a 6.80 per cent coupon rate, payable annually. The conversion price is £150, and the
32 Warrant Value Superior Clamps AB has a capital structure consisting of 4 million shares of equity and 500,000 warrants. Each warrant gives its owner the right to purchase one share of newly issued
33 Warrant Value Omega Airlines’ capital structure consists of 1.5 million shares of equity and zero coupon bonds with a face value of $10 million that mature in six months. The firm just announced
1 You have been hired to value a new 10-year callable, convertible bond. The bond has a 5.6 per cent coupon rate, payable annually. The conversion price is £150, and the equity currently sells for
2 Your firm has 3 million shares of equity and 100,000 warrants. Each warrant gives its owner the right to purchase one share of newly issued equity for an exercise price of €15. The warrants are
3 Review the reasons given for why firms issue convertible bonds. Which one do you think is the most valid?Explain. (40 marks)
1 Why do you think Kartner is suggesting a conversion price of €25? Given that the company is not publicly traded, does it even make sense to talk about a conversion price?Kartner Meister was
2 What is the floor value of the S&S Air convertible bond?Kartner Meister was recently hired by S&S Air AB to assist the company with its short-term financial planning and to evaluate the company’s
3 What is the conversion ratio of the bond?Kartner Meister was recently hired by S&S Air AB to assist the company with its short-term financial planning and to evaluate the company’s performance.
4 What is the conversion premium of the bond?Kartner Meister was recently hired by S&S Air AB to assist the company with its short-term financial planning and to evaluate the company’s performance.
5 What is the value of the option?Kartner Meister was recently hired by S&S Air AB to assist the company with its short-term financial planning and to evaluate the company’s performance. Kartner
6 Is there anything wrong with Hans’s argument that it is cheaper to issue a bond with a convertible feature because the required coupon is lower?Kartner Meister was recently hired by S&S Air AB to
7 Is there anything wrong with Stephan’s argument that a convertible bond is a bad idea because it allows new shareholders to participate in gains made by the company?Kartner Meister was recently
8 How can you reconcile the arguments made by Hans and Stephan?Kartner Meister was recently hired by S&S Air AB to assist the company with its short-term financial planning and to evaluate the
9 During the debate, a question comes up concerning whether the bonds should have an ordinary(not make-whole) call feature. Kartner confuses everybody by stating, ‘The call feature lets S&S Air
10 Download the financial accounts of 10 companies and look for any issues of warrants or convertibles.You may find examples of bonds that have conversion options or warrant-like properties. Are
10 The most important accounting standard for warrants and convertibles is IAS 39 Financial Instruments:Recognition and Measurement. IAS 39 provides definitions for different types of financial
1 The derivative positions held by all companies that follow IFRS must be reported at fair value. Guidance is contained in IAS 39 Financial Instruments: Recognition and Measurement. You should also
2 Every company that uses international accounting standards must have a statement on its hedging activity.Download the financial accounts of a company from your country. Read through the risk
1 What is the monthly mortgage payment on Finn’s mortgage?Jennifer McAfee recently received her university master’s degree and has decided to enter the mortgage brokerage business. Rather than
2 What is the most significant risk Jennifer faces in this deal?Jennifer McAfee recently received her university master’s degree and has decided to enter the mortgage brokerage business. Rather
3 How can Jennifer hedge this risk?Jennifer McAfee recently received her university master’s degree and has decided to enter the mortgage brokerage business. Rather than work for someone else, she
4 Suppose that, in the next three months, the market rate of interest rises to 9 per cent.(a) How much will Ian be willing to pay for the mortgage?(b) What will happen to the value of Treasury bond
5 Suppose that, in the next three months, the market rate of interest falls to 7 per cent.(a) How much will Ian be willing to pay for the mortgage?(b) What will happen to the value of T-bond futures
6 Are there any possible risks Jennifer faces in using Treasury bond futures contracts to hedge her interest rate risk?Jennifer McAfee recently received her university master’s degree and has
1 Estimate the number of futures contracts required. (25 marks)Malaika plc, a British company, is planning to make a payment in euros of €150 million at the end of September.However, the nearest
2 Assume that, at the end of September, the spot rate turns out to be €1.55/£ and a futures contract taken out at the end of September to expire on 13 December is quoted at €1.50/£. Estimate
3 Review the primary differences between hedging with futures and hedging with forwards. (25 marks)Malaika plc, a British company, is planning to make a payment in euros of €150 million at the end
4 Explain what is meant by a currency option. Provide a worked example of a currency option strategy and the reasons for its use. Explain why currency put options are not necessarily a bearish
1 Derivatives: Hedging and Risk Discuss the differences between hedging and speculation with derivatives. Many corporations’ risk management divisions earn significant profits each year. What does
2 Forward Contracts Explain what is meant by a forward contract. Use a non-financial example to illustrate how a forward contract works. What are the advantages and disadvantages of forward contracts?
3 Futures Contracts What is a futures contract? What are the advantages and disadvantages of futures contracts?
4 Interest Rate Futures Contracts Explain how interest rates can be hedged by futures contracts.Provide an example of how you could use one to hedge against an increase in interest rates.
5 Duration Hedging What is duration and how can it be used to hedge against interest rate changes?Use an example to illustrate your answer.
7 Financial Risk Management Using Table 25.10, discuss the main concerns of corporations when using derivatives to manage risk.REGULAR
8 Hedging Provide an overview of the empirical determinants of hedging. If you were the corporate treasurer for a company, would you recommend hedging as a risk management strategy? Explain.
9 Hedging Strategies If a firm is buying futures contracts on lumber as a hedging strategy, what must be true about the firm’s exposure to lumber prices? If a firm is writing call options on cocoa
10 Hedging Strategies What are the three strategies a firm has at its disposal to deal with currency risk?What are the advantages and disadvantages of each? Explain.
11 Hedging Risks Vestas Wind Systems A/S, the Danish wind energy company, would like to consider hedging the risk of its operations. What are the main risks the company faces and how would it hedge
14 Option Explain why a put option on a bond is conceptually the same as a call option on interest rates.
16 Swaps Suppose a firm enters a fixed for floating interest rate swap with a swap dealer. Using an example and a diagram, illustrate the cash flows that will occur as a result of the swap. Why would
17 Transactions versus Economic Exposure What is the difference between transactions and economic exposure? Which can be hedged more easily? Why?
18 Hedging Exchange Rate Risk If a Dutch company exports its goods to the UK, how would it use a futures contract on sterling to hedge its exchange rate risk? Would it buy or sell sterling futures?
19 Hedging Strategies You are the finance director of a British company that is expecting a payment in euros of €200 million at the end of September and wish to hedge against currency risk.
20 Swaps Syco SA, a distributor of food and food-related products, has announced it has signed an interest rate swap. The interest rate swap effectively converts the company’s €100 million, 4.6
21 Interest Swaps Consider two firms, Larss plc and Sousa plc. Larss plc has a better credit rating and can borrow cheaper than Sousa plc in both fixed and floating rate markets. Specifically, Larss
22 Hedging Strategies Suntharee Lhaopadchan is a Thai student who is planning a one-year stay in the United Kingdom. She expects to arrive in the United Kingdom in eight months. She is worried about
23 Future Quotes Suppose you purchase a September cocoa futures contract on 16 May 2019, at the last price of the day. What will your profit or loss be if the cocoa prices turn out to be $3,000 per
24 Futures Quotes Suppose you sell five May 2020 gold futures contracts on 16 April 2020, at the last price of the day at $1,648.6 per ounce. What will your profit or loss be if gold prices turn out
26 Marking to Market You are long 10 gold futures contracts, established at an initial settle price of €1,000 per ounce, where each contract represents 100 ounces. Over the subsequent four trading
27 Floating Rate Agreement Quotes Rock Spring plc decides it wants to borrow capital for a six-month period in two three-month instalments. The company can borrow at FRB + 2 per cent. FRB rates today
28 Duration What is the duration of a bond with four years to maturity and a coupon of 9 per cent paid annually if the bond sells at par?
29 Duration Pillow Private Bank has the following market value balance sheet:Asset or Liability Market Value (in £ billions) Duration (in years)Government deposits 28 0 Trade receivables 580 1.20
30 Hedging with Futures Suppose today is 16 April 2020, your firm produces chocolate and needs 75,000 tonnes of cocoa in July 2020 for an upcoming promotion. You would like to lock in your costs
31 Interest Rate Swaps ABC Company and XYZ Company need to raise funds to pay for capital improvements at their manufacturing plants. ABC Company is a well-established firm with an excellent credit
32 Duration Per and Birthe Clausen have a son who will begin university three years from today. Expenses of€30,000 will need to be paid at the beginning of each of the four years that their son
33 Duration What is the duration of a bond with two years to maturity if the bond has a coupon rate of 8 per cent paid semi-annually, and the market interest rate is 7 per cent?CHALLENGE
35 Forward Pricing You enter into a forward contract to buy a 10-year, zero coupon bond that will be issued in one year. The face value of the bond is £100,000, and the one-year and 11-year spot
36 Forward Pricing This morning you agreed to buy a one-year Treasury bond in six months. The bond has a face value of £100,000. Use the spot interest rates listed in the table below to answer the
1 Net Working Capital What is short-term financial planning? Why is short-term financial planning crucial to a company? Provide an example of a company that has either undergone an insolvency event
2 Cash Review the different ways in which cash can increase or decrease in a firm. Use the accounting equation to support your answer. What are some of the characteristics of a firm with a long
3 Short-term Financing Needs Which type of company is likely to have large short-term financing needs?Provide an example using a company from your country.

Showing 1000 - 1100 of 3853

First
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
Last

Services

Sitemap
Fun
Definitions
Become Tutor
Study Help Categories
Recent Questions
Expert Questions

Company Info

Security
Copyrights
Privacy Policy
Terms & Conditions
SolutionInn Fee
Scholarship

Get In Touch

About Us
Contact Us
Career
Jobs
FAQ
Campus Ambassador

Secure Payment

Download Our App

© 2024 SolutionInn. All Rights Reserved