Options and Corporate Finance
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Define a call option and a put option, and describe the payoff function for each of these options.
List and describe the variables that affect the value of an option. Calculate the value of a call option and of a put option.
Name some of the real options that occur in business and explain why traditional NPV analysis does not accurately incorporate their values.
Describe how the agency costs of debt and equity are related to options.
Explain how options can be used to manage a firm's exposure to risk.
Sometimes even the most carefully laid business plans must be changed. This fact was especially apparent in Las Vegas, Nevada after the U.S. economy went into a recession in December 2007. A comparison of the decisions and outcomes at three casino/hotel/condo ...