Questions from Corporate Finance

Q: Explain the following limits on the prices of warrants: a

Explain the following limits on the prices of warrants: a. If the stock price is below the exercise price of the warrant, the lower bound on the price of a warrant is zero. b. If the stock price is ab...

Q: In the previous problem, suppose you wanted the option to sell

In the previous problem, suppose you wanted the option to sell the land to the buyer in one year. Assuming all the facts are the same, describe the transaction that would occur today. What is the pric...

Q: If a firm is buying call options on pork belly futures as

If a firm is buying call options on pork belly futures as a hedging strategy, what must be true about the firm’s exposure to pork belly prices?

Q: Refer to Table 25.2 in the text to answer this

Refer to Table 25.2 in the text to answer this question. Suppose you sell five March 2012 silver futures contracts on November 22, 2011, at the last price of the day. What will your profit or loss be...

Q: McConnell Corp. has a book value of equity of $13

McConnell Corp. has a book value of equity of $13,205. Long-term debt is $8,200. Net working capital, other than cash, is $2,205. Fixed assets are $18,380. How much cash does the company have? If curr...

Q: Gemini, Inc., an all-equity firm, is considering

Gemini, Inc., an all-equity firm, is considering a $1.7 million investment that will be depreciated according to the straight-line method over its four-year life. The project is expected to generate e...

Q: What are some of the potential problems with looking at IRRs when

What are some of the potential problems with looking at IRRs when evaluating a leasing decision?

Q: What would the lease payment have to be for both the lessor

What would the lease payment have to be for both the lessor and the lessee to be indifferent about the lease? You work for a nuclear research laboratory that is contemplating leasing a diagnostic scan...

Q: The price of Ervin Corp. stock will be either $74

The price of Ervin Corp. stock will be either $74 or $96 at the end of the year. Call options are available with one year to expiration. T-bills currently yield 5 percent. a. Suppose the current price...

Q: What is the difference between an American option and a European option

What is the difference between an American option and a European option?