EBK MANAGERIAL ECONOMICS & BUSINESS STR
9th Edition
ISBN: 8220103676267
Author: Baye
Publisher: YUZU
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Chapter 14, Problem 16PAA
Section 16(a) of the Securities and Exchange Act of 1934, as amended in 1990, requires that the officers, directors, and principal shareholders of companies disclose the extent of their ownership of equity securities of the company and any changes in the ownership. Section 16(b) permits companies to recover trading profits realized by such people arising from short-swing transactions in the company securities. Do you think that, as a result of these laws, the government will be forced to spend more money on its auditing and enforcement efforts? Explain.
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Lyft launched its IPO on April 1st 2019 with a share price of $72. Before the IPO, Lyft’s board of directors was likely trying to decide how to compensate CEO Logan Green to provide an incentive for him to increase the firm’s performance and share price after it went public. Let’s say the board was considering two possibilities such that they were deciding between providing one million dollars worth of shares of the firm stock at $72 per share or one million dollars worth of call options with a strike price of $72 and a maturity and vesting date one year after the IPO. To keep things simple, let’s say CEO Logan Green can choose between providing two levels of effort: regular effort or high effort. He has been exerting regular effort all along. He could switch to high effort which would be much more costly for him as he would have to work even longer hours, but the extra effort would likely result in better performance for the firm. The goal of the board’s incentive compensation is to…
Scenario 14-3
Victor is the recipient of $1 million from a lawsuit. Victor decides to use the money to purchase a small business in Florida. His business operates in a perfectly competitive industry. If Victor would have invested the $1 million in a risk-free bond fund, he could have earned $100,000 each year. After he bought the small business, Victor quit his job as a market analyst with Research, Inc., where he used to earn $75,000 per year.
Refer to Scenario 14-3. What is Victor's opportunity costs of operating his new business?
Assume that in March 2019, you bought a zero-coupon bond issued by a municipal government with a face value of $10,000 and a maturity date of March 2023.
a) Use a bond-pricing equation to illustrate the market price (the market value) of the zero-coupon bond in March 2020. You just have to write out the equation; you do not have to solve the equation
b) Assume that you are thinking about selling the zero-coupon bond in March 2020. Use a bond-pricing equation to illustrate what will determine the actual return that you will have earned on the bond. You just have to write out the equation; you do not have to solve the equation.
c) Assume that you end up selling the bond in March 2020 and that the market interest rate on the bond is lower in March of 2020 than it was in March of 2019. Briefly discuss the effects of the decrease in the bond’s interest rate on the actual return that you have earned on the bond..
Chapter 14 Solutions
EBK MANAGERIAL ECONOMICS & BUSINESS STR
Ch. 14 - Prob. 1CACQCh. 14 - Prob. 2CACQCh. 14 - Prob. 3CACQCh. 14 - Prob. 4CACQCh. 14 - Prob. 5CACQCh. 14 - Prob. 6CACQCh. 14 - Prob. 7CACQCh. 14 - Prob. 8CACQCh. 14 - Prob. 9CACQCh. 14 - Prob. 10CACQ
Ch. 14 - Prob. 11PAACh. 14 - Prob. 12PAACh. 14 - Prob. 13PAACh. 14 - Prob. 14PAACh. 14 - Prob. 15PAACh. 14 - Section 16(a) of the Securities and Exchange Act...Ch. 14 - Prob. 17PAACh. 14 - Prob. 18PAACh. 14 - Prob. 19PAACh. 14 - Prob. 20PAACh. 14 - Prob. 21PAACh. 14 - Prob. 22PAACh. 14 - Prob. 23PAA
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