The stockholders claim in a levered firm can be viewed as a call option; stockholders have the
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If managers or stockholders view their stakes as optionlike then they have some very clear incentives You know from problem 1 above that options are worth more the higher the value of the underlying asset the more volatile the underlying asset and the longer the time to expiration Thus managers will have incentives to 1 Increase the value of the underlying assets This means managers have an incentive ...View the full answer
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I have a teaching experience of more than 4 years by now in diverse subjects like History,Geography,Political Science,Sociology,Business Enterprise,Economics,Environmental Management etc.I teach students from classes 9-12 and undergraduate students.I boards I handle are IB,IGCSE, state boards,ICSE, CBSE.I am passionate about teaching.Full satisfaction of the students is my main goal.
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