Function of d1 logp pv ex v t 2 vt o d1 o o p

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Unformatted text preview: Tc )¨ ¸  rE ¨ ¸ ©V ¹ ©V ¹ WACC Option delta (49) Option delta spread in option val ue spread in stock price Up- and downside change in the binominal model (50) 1  upside change u eV h 1  upside change d 1/u Black-Scholes Formula (51) Value of call option = [ delta · share price ] – [ bank loan ] = [ N(d1) · P ] – [ N(d2) · PV(EX) ] where o N(d1) = Cumulative normal density function of (d1) log>P / PV ( EX )@ V t  2 Vt o d1 o o P = Stock Price N(d2) = Cumulative normal density function of (d2) o d2 o PV(EX) = Present Value of Strike or Exercise price = EX · e-rt d1  V t Download free ebooks at bookboon.com 94 Corporate Finance Index Index —A— Abandonment option, 93 Annuities, 13 Arbitrage pricing theory, 44 Asset pricing, 44 —B— Behavioral finance, 58 Beta, consumption, 45 Black-Scholes Model of Option Pricing, 90 Bonds valuing, 17 yield curve, 19 Book rate of return, 25 Break Even analysis, 51 —C— Call option, 80 Capital assets pricing model, 41 Capital budgeting, 46 in practice, 51 Capital structure theory pecking order theory, 71 trade-off theory, 69 with imperfect markets, 66 Consumption beta, 45 Cost of capital, 46 new projects, 48 preferred stocks, 47 —D— Debt characteristics, 60 Debt policy, 61 Diversification, 31 Dividend payments, 74 Dividend policy, 74 firm value, 76 Dividends Lintner's facts, 76 stock repurchases, 74 —E— Equity characteristics, 60 Exercise price, 80 Expansion option, 93 Expiration date, 80 —F— Fle...
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