Corporate Finance (4th Edition) (Pearson Series in Finance) - Standalone book

4th Edition

ISBN: 9780134083278

Author: Jonathan Berk, Peter DeMarzo

Publisher: PEARSON

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Concept explainers

Dividend Valuation

Dividend refers to a reward or cash that a company gives to its shareholders out of the profits. Dividends can be issued in various forms such as cash payment, stocks, or in any other form as per the company norms. It is usually a part of the profit that…

Dividend Discount Model

Dividend payments are generally paid to investors or shareholders of a company when the company earns profit for the year, thus representing growth. The dividend discount model is an important method used to forecast the price of a company’s stock. It is…

Capital Gains Yield

It may be referred to as the earnings generated on an investment over a particular period of time. It is generally expressed as a percentage and includes some dividends or interest earned by holding a particular security. Cases, where it is higher normal…

Stock Valuation

In simple words, stock valuation is a tool to calculate the current price, or value, of a company. It is used to not only calculate the value of the company but help an investor decide if they want to buy, sell or hold a company's stocks.

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Textbook Question

Chapter 21, Problem 19P

Harbin Manufacturing has 10 million shares outstanding with a current share price of $20 per share. In one year, the share price is equally likely to be $30 or $18. The risk-free interest rate is 5%.

a. What is the expected return on Harbin stock?
b. What is the risk-neutral probability that Harbin’s stock price will increase?

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Chapter 21, Problem 18P

Chapter 21, Problem 20P

Chapter 21 Solutions

Corporate Finance (4th Edition) (Pearson Series in Finance) - Standalone book

Ch. 21.1 - What is the key assumption of the binomial option...Ch. 21.1 - Why dont we need to know the probabilities of the...Ch. 21.1 - Prob. 3CC Ch. 21.2 - What are the inputs of the Black-Scholes option...Ch. 21.2 - What is the implied volatility of a stock?Ch. 21.2 - How does the delta of a call option change as the...Ch. 21.3 - What are risk-neutral probabilities? How can they...Ch. 21.3 - Does the binominal model or Black-Scholes model...Ch. 21.4 - Is the beta of a call greater or smaller than the...Ch. 21.4 - What is the leverage ratio of a call?

Ch. 21.5 - Prob. 1CC Ch. 21.5 - The fact that equity is a call option on the firms...Ch. 21 - The current price of Estelle Corporation stock is...Ch. 21 - Using the information in Problem 1, use the...Ch. 21 - Suppose the option in Example 21.11 actually sold...Ch. 21 - Eagletrons current stock price is 10. Suppose that...Ch. 21 - What is the highest possible value for the delta...Ch. 21 - Hema Corp. is an all equity firm with a current...Ch. 21 - Consider the setting of Problem 9. Suppose that in...Ch. 21 - Roslin Robotics stock has a volatility of 30% and...Ch. 21 - Rebecca is interested in purchasing a European...Ch. 21 - Using the data in Table 21.1, compare the price on...Ch. 21 - Consider again the at-the-money call option on...Ch. 21 - Harbin Manufacturing has 10 million shares...Ch. 21 - Using the information on Harbin Manufacturing in...Ch. 21 - Using the information in Problem 1, calculate the...Ch. 21 - Prob. 23P Ch. 21 - Prob. 24P Ch. 21 - Calculate the beta of the January 2010 9 call...Ch. 21 - Consider the March 2010 5 put option on JetBlue...

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