Questions from Corporate Finance

Q: Blue Angel, Inc., a private firm in the holiday gift

Blue Angel, Inc., a private firm in the holiday gift industry, is considering a new project. The company currently has a target debt–equity ratio of .40, but the industry target debt–equity ratio is ....

Q: What is the NAL for Wildcat? What is the maximum lease

What is the NAL for Wildcat? What is the maximum lease payment that would be acceptable to the company? Required information The Wildcat Oil Company is trying to decide whether to lease or buy a new c...

Q: Survivor, Inc., an all-equity firm, has eight

Survivor, Inc., an all-equity firm, has eight shares of stock outstanding. Yesterday, the firm ’ s assets consisted of nine ounces of platinum, currently worth $1,750 per ounce. Today, the company iss...

Q: Brozik Corp. has a zero coupon bond that matures in five

Brozik Corp. has a zero coupon bond that matures in five years with a face value of $60,000. The current value of the company’s assets is $57,000, and the standard deviation of its return on assets is...

Q: Insurance, whether purchased by a corporation or an individual, is

Insurance, whether purchased by a corporation or an individual, is in essence an option. What type of option is an insurance policy?

Q: If a U.S. company exports its goods to Japan

If a U.S. company exports its goods to Japan, how would it use a futures contract on Japanese yen to hedge its exchange rate risk? Would it buy or sell yen futures? Does the way the exchange rate is q...

Q: Strudler Real Estate, Inc., a construction firm financed by both

Strudler Real Estate, Inc., a construction firm financed by both debt and equity, is undertaking a new project. If the project is successful, the value of the firm in one year will be $280 million, bu...

Q: In addition to the five factors discussed in the chapter, dividends

In addition to the five factors discussed in the chapter, dividends also affect the price of an option. The Black–Scholes option pricing model with dividends is: C = S × e–dt × N(d1) – E × e–Rt × N(d2...

Q: The put–call parity condition is altered when dividends are paid

The put–call parity condition is altered when dividends are paid. The dividend-adjusted put–call parity formula is: S × e−dt − P = E × e−Rt + C where d is again the continuously compounded dividend yi...

Q: In the chapter we noted that the delta for a put option

In the chapter we noted that the delta for a put option is N( d 1 ) − 1. Is this the same thing as −N(− d 1 )?