In recent years, top managers have been given large packages of options, giving them the right to buy stock in the firm at a fixed price. Will these compensation schemes make managers more responsive to stockholders? Why or why not? Are lenders to the firm affected by these compensation schemes?
Answer to relevant QuestionsReader's Digest has voting and nonvoting shares. About 70% of the voting shares are held by charitable institutions, which are headed by the CEO of Reader's Digest. Assume that you are a large holder of the nonvoting shares. ...United Airlines has a beta of 1.50. The standard deviation in the market portfolio is 22% and United Airlines has a standard deviation of 66%. a. Estimate the correlation between United Airlines and the market portfolio. b. ...Assume that you have half of your money invested in Times Mirror, the media company, and the other half invested in Unilever, the consumer product giant. The expected returns and standard deviations on the two investments ...You have just run a regression of monthly returns on MAD, a newspaper and magazine publisher, against returns on the S&P 500, and arrived at the following result: RMAD = −0.05% + 1.20 RS&P The regression has an R2 of 22%. ...Biogen, a biotechnology firm, had a beta of 1.70 in 1995. It had no debt outstanding at the end of that year. a. Estimate the cost of equity for Biogen, if the Treasury bond rate is 6.4%. b. What effect will an increase in ...
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