PRIN.OF CORPORATE FINANCE
13th Edition
ISBN: 9781260013900
Author: BREALEY
Publisher: RENT MCG
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Chapter 22, Problem 21PS
Summary Introduction
To determine: The put value.
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Find the profitability index for Oman Air conditioner Company if the initial investment is 4000 OMR and the cash Inflows are as follows: Year 1 =1350 OMR; Year 2 =1400 OMR; Year 3=1450 OMR and Year 4=1500 OMR. Use discount rate as 5%.
Select one:
a. 1.69
b. 1.48
c. 1.26
d. 1.83
e. None of the options
Find the Net Present Value (NPV) for Oman Computer company if the initial investment is 5000 OMR and the cash Inflows are as follows: Year 1 =1250 OMR; Year 2 =1500 OMR; Year 3=1750 OMR and Year 4=2000 OMR. Use discount rate as 3%.
Select one:
a. 1005.94 OMR
b. 1574.27 OMR
c. 2344.92 OMR
d. None of the options
e. 2070.76 OMR
question
3.How long do the following options have before they expire?Call Price = $5Put Price = $9Stock Price = $65Exercise Price = $70Risk-free rate = 3% per annum
A defender and a challenger are considered in a replacement analysis. The following decision tree
includes the data where FC: first cost, AB: annual benefit; C: Challenger and D: Defender. If annual
compound interest rate is 10%, when must we replace the defender?
Node no branch Cash flow
FC=-45,000 $
Life=20 yrs
AB= +8,500 $
FC=-10,000 $
Life=5 yrs
AB= +4,500 $
FC=-10,000 $
Life=5 yrs
10
2 D
1D
AB= +5,500 $
FC=-35,000 $
Life=15 yrs
AB= +4,500 $
FC=-10,000 $
Life=5 yrs
AB= +5,000 $
FC=-25,000 $
Life=10 yrs
AB= +9,000 $
FC=-20,000 $
Life=5 yrs
AB= +6,000 $
FC=-15,000 $
Life=5 yrs
AB= +5,000 $
20
3
1D
20
10
2 D
Chapter 22 Solutions
PRIN.OF CORPORATE FINANCE
Ch. 22 - Real options Respond to the following comments. a....Ch. 22 - Prob. 2PSCh. 22 - Real options True or false? a. Real-options...Ch. 22 - Prob. 4PSCh. 22 - Real options Describe each of the following...Ch. 22 - Expansion options Look again at the valuation in...Ch. 22 - Expansion options Look again at Table 22.2. How...Ch. 22 - Prob. 8PSCh. 22 - Timing options Look back at the Malted Herring...Ch. 22 - Prob. 10PS
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- Find the Net Present Value (NPV) for Muscat Packaging Company if the initial investment is 20000 OMR and the cash Inflows are as follows: Year 1 =12500 OMR; Year 2 =13500 OMR; Year 3=14500 OMR and Year 4=15500 OMR. Use discount rate as 4.05%. Select one: a. 30578.84 OMR b. None of the options c. 24074.75 OMR d. 12074.50 OMR e. 33074.34 OMRarrow_forwardCompute the price of the European call option using the R program introduced in class where K = 100, S0 = 85, r = 10%, σ = 25% and T=0.5 Year. a. Use the Black-Scholes-Merton formula. b. Use the Monte-Carlo method. (Decide on the number of iterations and time step by your own) c. Compare the results in part a and b. d. Do the same calculations for the put option price where all parameters are the samearrow_forwardFind the Net Present Value (NPV) for Muscat Packaging Company if the initial investment is 20000 OMR and the cash Inflows are as follows: Year 1 =12500 OMR; Year 2 =13500 OMR; Year 3=14500 OMR and Year 4=15500 OMR. Use discount rate as 4.05%.Select one:a. None of the optionsb. 24074.75 OMRc. 33074.34 OMRd. 12074.50 OMRe. 30578.84 OMR If the stock is 1100 and debtors are 0.543 from receivables and receivables are 3200, equity 300 account payable 3000, the cash is 100, then the gross working capital is Select one: a. All the given choices are not correct b. 6137.60 c. 6437.60 d. 9437.60 e. 9137.60arrow_forward
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