Chapter 25

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Chapter 25

Input boxes in tan
Output boxes in yellow
Given data in blue
Calculations in red

NOTE: Some functions used in these spreadsheets may require that
the "Analysis ToolPak" or "Solver Add-in" be installed in Excel.
To install these, click on "Tools|Add-Ins" and select "Analysis ToolPak"
sis ToolPak"
Chapter 25
Question 3

Input Area:

Current stock price
Exercise price
Call option
Expiration (months)
Risk-free rate

Output Area:

Put price             \$   -
Chapter 25
Question 8

Input Area:

Current stock price
Exercise price
Risk-free rate
Expiration (months)
Standard deviation

Output Area:

d1                    #DIV/0!
d2                    #DIV/0!
N(d1)                 #DIV/0!
N(d2)                 #DIV/0!

Call                  #DIV/0!
Put                   #DIV/0!
Chapter 25
Question 11

Input Area:

Current selling price
Price % increase
Standard deviation
Expiration (months)
Risk-free rate

Output Area:

The 'stock' price is              \$0
and the exercise price is
\$0
d1                        #DIV/0!
d2                      #DIV/0!
N(d1)                   #DIV/0!
N(d2)                   #DIV/0!
Call                    #DIV/0!
Chapter 25
Question 20

Input Area:

Face value of debt
Maturity (months)
Market value
Standard deviation
Risk-free rate

Output Area:

d1                   #DIV/0!
d2                   #DIV/0!
N(d1)                #DIV/0!
N(d2)                #DIV/0!
Equity value         #DIV/0!
Debt value           #DIV/0!

Cost of debt         #DIV/0!
Chapter 25
Question 22

Input Area:

Maturity (years)
Face value
Market value
Standard deviation
Risk-free rate
NPV

Output Area:

a. d1                         #DIV/0!
d2                         #DIV/0!
N(d1)                      #DIV/0!
N(d2)                      #DIV/0!
Equity value               #DIV/0!

b. Debt value                 #DIV/0!

c. Rd                         #DIV/0!

d. d1                         #DIV/0!
d2                         #DIV/0!
N(d1)                      #DIV/0!
N(d2)                      #DIV/0!
Equity value               #DIV/0!

e. Debt value                    #DIV/0!
Rd                            #DIV/0!
When the firm accepts the new project,
part of the NPV accrues to bondholders.
This increases the present value of the
bond, thus reducing the return on the bond.
Additionally, the new project makes the
firm safer in the sense it increases the
value of assets, thus increasing the
probability the call will end in the money
and the bondholders will receive their
payment.

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