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Appendix 21A: APV Approach to Leasing APV = All-Equity Value + Financing NPV The NPV of the financing is the forgone interest tax shields on the debt that ClumZee movers didn’t go into when they leased instead of bought the truck. ClumZee agreed to a lease payment of $5,900. This payment would support a loan of $25,543.91 Appendix 21A: APV Approach to Leasing The lost interest tax shield associated with this additional debt capacity of $25,543.91 has a present value of $1,135.30 21.7 Debt Displacement and Lease Valuation The lost interest tax shield associated with this additional debt capacity of $25,219.20 has a present value of $ Corporate Finance  Ross ? Westerfield ? Jaffe Sixth Edition Sixth Edition 22 Chapter Twenty Two Options and Corporate Finance: Basic Concepts Chapter Outline 22.1 Options 22.2 Call Options 22.3 Put Options 22.4 Selling Options 22.5 Reading The Wall Street Journal 22.6 Combinations of Options 22.7 Valuing Options 22.8 An Option?Pricing Formula 22.9 Stocks and Bonds as Options 22.10 Capital-Structure Policy and Options 22.11 Mergers and Options 22.12 Investment in Real Projects and Options 22.13 Summary and Conclusions 22.1 Options Many corporate securities are similar to the stock options that are traded on organized exchanges. Almost every issue of corporate stocks and bonds has option features. In addition, capital structure and capital budgeting decisions can be viewed in terms of options. 22.1 Options Contracts: Preliminaries An option gives the holder the right, but not the obligation, to buy or sell a given quantity of an asset on (or perhaps before) a given date, at prices agreed upon today. Calls versus Puts Call options gives the holder the right, but not the obligation, to buy a given quantity of some asset at some time in the future, at prices agreed upon today. When exercising a call option, you “call in” the asset. Put options gives the holder the right, but not the obligation, to sell a given quantity of an asset at so