Question 20 (2 points) Raspberry Ltd stock is trading at $36 per share. A put option on Raspberry stock with an exercise price of $33 is available for $2.10. The exercise value of the option is $, while the time value is $ $3 / $0.90 $0.90 / $ 2.10 $0.90 / $3 2$0 / $2.10 Question 21 (5 points) Reynolds Resorts is currently 100% equity financed. The CFO is considering a recapitalization plan under which the firm would issue long-term debt with a yield of 9% and use the proceeds to repurchase common stock. The recapitalization would not change the company's total assets, nor would it affect the firm's basic earning power (EBIT/Assets), which is currently 15%. The CFO believes that this recapitalization would reduce the WACC and increase stock price. Which of the following would also be likely to occur if the company goes ahead with the recapitalization plan? The company's ROE would decline. The company's cost of equity would increase. The company's earnings per share would decline. The company's ROE would decline. Question 23 (2 points) 2. Suppose the exchange rate between Canadian dollars and Swiss francs is SF 1.10 = $1.00, and the exchange rate between the Canadian dollar and the euro is $1.00 = 0.68 euros. What is the cross-rate of Swiss francs to euros? A) 0.43 C) 0.86 D) 1.62 B) 1.41 7) Suppose a firm increases the operating leverage used to produce a given quantity of output, what will it normally lead to? a reduction in its fixed assets turnover ratio a decrease in the variability of its expected EPS oo a decrease in the standard deviation of its expected EBIT a decrease in its business risk