公司理财原版英文课件Chap023.pptVIP

* * * Inalienable means that they cannot be sold. * Many firms will reset the exercise price lower when the stock price of the firm tumbles. This preserves the incentive compatibility. It also makes the option worth considerably more. However, this revaluation calls into question whether options really reduce agency costs. Further, recent discussions suggest that FASB may require option grants to be expensed. In fact, some firms have voluntarily undertaken this practice. * * By the way, note that this 3-period option is worth $4.52, which is much greater than the otherwise-identical 1-period call option value of $2.38. * Note that the 3-period option without the reset provision is worth only $4.52 * * * Brealey, Myers, and Marcus Fundamentals of Corporate Finance, 3e. And “Exploiting Uncertainty: The “Real Options” Revolution in Decision Making” Business Week, June 7, 1999. Of course, the collapse of Enron provides a discussion about not only this issue, but a host of others. 23-* Options and Corporate Finance: Extensions and Applications Chapter 23 Copyright ? 2010 by the McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Key Concepts and Skills Understand executive stock options Understand how the option to expand increases the value of a start-up Be able to apply the binomial model to multiple periods Understand how embedded options impact a project’s NPV Chapter Outline 23.1 Executive Stock Options 23.2 Valuing a Start Up 23.3 More on the Binomial Model 23.4 Shutdown and Reopening Decisions 23.1 Executive Stock Options Executive Stock Options exist to align the interests of shareholders and managers. Executive Stock Options are call options (technically warrants) on the employer’s shares. Inalienable Typical maturity is 10 years. Typical vesting period is 3 years. Most include an implicit reset provision to preserve incentive compatibility. Executive Stock Options give executives an important tax break: grants of at-the-money options are