Answered step by step
Verified Expert Solution
Question
1 Approved Answer
begin{tabular}{l|ll} Question 9 & You're updating a company's DCF valuation model, and government bond yields (rf) have end{tabular} Not yet saved increased 1 percentage point,
\begin{tabular}{l|ll} Question 9 & You're updating a company's DCF valuation model, and government bond yields (rf) have \end{tabular} Not yet saved increased 1 percentage point, though the country's inflation and GDP growth expectations Marked out of are unchanged. 3.00 You're thinking through how this government bond yield hike might affect the model's estimated share price. Overall, the levered company's model-estimated share price will: Select one: a. Fall, mostly due to higher future interest expense which reduces profit. b. Fall, mostly due to higher required returns. c. Remain unchanged. d. Rise, mostly due to higher interest tax shields. e. Rise, mostly due to higher expected returns and equally higher required returns. Question 10 You're asked to value executive option compensation at your US firm and you're trying to Not yet saved estimate the appropriate standard deviation of returns to use in the Black Scholes option Marked out of valuation formula. You observe that the: 3.00 The VIX is currently 25 percentage points per annum (pp pa); Remove flag Your firm's CAPM equity beta was 2 over the last 5 years, and is expected to remain unchanged in the future; Your firm's past standard deviation of returns was 40 percentage points per annum over the last 5 years, during which time there was little economic or financial market volatility. Based on this information, the Black Scholes formula's standard deviation should be: Select one: a. Less than 25pp pa. b. 25pppa. c. 40pppa d. 50pppa e. More than 50pp pa
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started