1. Assume an option has an exercise price of $40. The underlying stock pays a 10% stock dividend. What changes, if any, would be made to the options position?
2. Note that in all of our cash flow computations to determinecash flow from assets, we never include the addition to retained profits. why not? is this an oversight?
3. Suppose your company has an equity beta of 0,9 and the current risk-free rate is 7,1%. if the expected market risk premium is 10%, what is your cost of equity capital?