Question: Explain the rationale behind the idea that equity is a call option on a firm's assets. In other words, explain why equity ownership of a

Explain the rationale behind the idea that equity is a call

Explain the rationale behind the idea that equity is a call option on a firm's assets. In other words, explain why equity ownership of a firm is equivalent to owning a call option on the firm's assets. Next, explain what it would mean for shareholders to allow this call option to expire, and under what circumstances shareholders would do so

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