Question
I am stuck on this exam preparation question. How do I go about this? Thanks! 1.Find an option award to an executive made by a
I am stuck on this exam preparation question. How do I go about this? Thanks!
1.Find an option award to an executive made by a public company in 2019.
(a) Use reasonable inputs to find the total value of the option award using the Black-Scholes model.
(b) Update your estimate of the total value of the option award if:
(i) The company announces that it will pay a cash dividend of 3% of outstanding stock market value each year going forward (note: any discounting should be using continuous time and you can use a rate of r = 10%)
(ii)The company announces that it will repurchase 3% of its stock each year going forward
(iii) The stock market crashes after one year and the market goes down by 30% (and so does the company's stock price). Note: you can do the value calculation as of time 1.
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