9780321818171_berk_ch03

A suppose that if you receive the stock bonus you are

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Unformatted text preview: 0 bonus and 100 shares of the company’s stock. Whichever one you choose will be awarded today. The stock is currently trading for $63 per share. a. Suppose that if you receive the stock bonus, you are free to trade it. Which form of the bonus should you choose? What is its value? b. Suppose that if you receive the stock bonus, you are required to hold it for at least one year. What can you say about the value of the stock bonus now? What will your decision depend on? Valuation Principle 4. Bubba is a shrimp farmer. In an ironic twist, Bubba is allergic to shellfish, so he cannot eat any shrimp. Each day he has a one-tonne supply of shrimp. The market price of shrimp is $10,000 per tonne. a. What is the value of a tonne of shrimp to him? b. Would this value change if he were not allergic to shrimp? Why or why not? 5. Brett has almond orchards, but he is sick of almonds and prefers to eat walnuts instead. The owner of the walnut orchard next door has offered to swap this year’s crop with him in an even exchange. Assume he produces 1000 tonnes...
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This note was uploaded on 02/07/2014 for the course MIS 304 taught by Professor Mejias during the Spring '07 term at University of Arizona- Tucson.

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