Check all the apply to the company's shareholders call option?

Check All That Apply

When the company issued debt (borrowed money) it (management) acquired a call option to default on the debt (aka call option on the assets of the company - think balance sheet equation).

When the company issued debt (borrowed money) it (management) acquired a call option to default on the debt (aka call option on the assets of the company - think balance sheet equation).

In exchange, the lender (creditor) acquired a claim on the companys enterprise value (synonymous with the market value of the assets of company)In exchange, the lender (creditor) acquired a claim on the companys enterprise value (synonymous with the market value of the assets of company)

The exercise price of the call option on the company's assets is the amount of the debt obligation (amount actually due on amount borrowed).

The exercise price of the call option on the company's assets is the amount of the debt obligation (amount actually due on amount borrowed).

If the value of the companys enterprise value (market asset value) < the companys debt obligation (not the market value of the debt), then the company will default on the debt (won't exercise the call).

If the value of the companys enterprise value (market asset value) < the companys debt obligation (not the market value of the debt), then the company will default on the debt (won't exercise the call).

If the value of the companys enterprise value (market asset value) the companys debt obligation, then the company will pay the call option's exercise price (debt obligation) to retain the companys asset value.If the value of the companys enterprise value (market asset value) the companys debt obligation, then the company will pay the call option's exercise price (debt obligation) to retain the companys asset value.

The companys market asset value is equal to the value of the call option on the companys assets + market debt valueThe companys market asset value is equal to the value of the call option on the companys assets + market debt value