You alyst at Global Conglomerate and are considering entering the shoe business. You believe that you...

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You alyst at Global Conglomerate and are considering entering the shoe business. You believe that you have a very narrow window for entering this market. Because of Christmas demand, the time is right today and you believe that exactly a year from now would also be a good opportunity. Other than these two windows, you do not think another opportunity will exist to break into this business. It will cost you $34 million to enter the market. Because other shoe manufacturers exist and are public companies, you can construct a perfectly comparable company. Hence, you have decided to use the Black-Scholes formula to decide when and if you should enter the shoe business. Your analysis implies that the current value of an operating shoe company is $39 million and it has a beta of 1. However, the flow of customers is uncertain, so the value of the company is volatile-your analysis indicates that the volatility is 26% per year. Fifteen percent of the value of the company is attributable to the value of the free cash flows (cash available to you to spend how you wish) expected in the first year. If the one-year risk-free rate of interest is 4%: a. should Global enter this business and, if so, when? b. how will the decision change if the current value of a shoe company is $35 million instead of $39 million? c. plot the value of your investment opportunity as a function of the current value of a shoe company. d. plot the beta of the investment opportunity as a function of the current value of a shoe company. a. The value of stock excluding dividends is $ million. (Do not round until the final answer. Then round to two decimal places.) The present value of the cost to enter the market is $7 million. (Do not round until the final answer. Then round to four decimal places.) The value of d is while the value of d (Do not round until the final answer. Then round to four decimal places.) The value of the option is $ million. (Do not round until the final answer. Then round to two decimal places.) So the value of waiting is $ million. The value of investing today is $ million. So the company (Do not round until the final answer. Then round to two decimal places.) b. The value of stock excluding dividends is $ . (Do not round until the final answer. Then round to two decimal places.) The value of d is while the value of d is (Do not round until the final answer. Then round to four decimal places.) The value of the option is $ million. (Do not round until the final answer. Then round to two decimal places.) So the value of waiting is $ million. The value of investing today is $ (Do not round until the final answer. Then round to two decimal places.) c. Choose the correct graph below. enter the business now. million. So the company enter the business now. You are a financial analyst at Global Conglomerate and are considering entering the shoe business. You believe that you have a very narrow window for entering this market. Because of Christmas demand, the time is right today and you believe that exactly a year from now would also be a good opportunity. Other than these two windows, you do not think another opportunity will exist to break into this business. It will cost you $34 million to enter the market. Because other shoe manufacturers exist and are public companies, you can construct a perfectly comparable company. Hence, you have decided to use the Black-Scholes formula to decide when and if you should enter the shoe business. Your analysis implies that the current value of an operating shoe company is $39 million and it has a beta of 1. However, the flow of customers is uncertain, so the value of the company is volatile-your analysis indicates that the volatility is 26% per year. Fifteen percent of the value of the company is attributable to the value of the free cash flows (cash available to you to spend how you wish) expected in the first year. If the one-year risk-free rate of interest is 4%: a. should Global enter this business and, if so, when? b. how will the decision change if the current value of a shoe company is $35 million instead of $39 million? c. plot the value of your investment opportunity as a function of the current value of a shoe company. d. plot the beta of the investment opportunity as a function of the current value of a shoe company. The value of d is while the value of d is . (Do not round until the final answer. Then round to four decimal places.) The value of the option is $ million. (Do not round until the final answer. Then round to two decimal places.) So the value of waiting is $ million. The value of investing today is $ million. So the company (Do not round until the final answer. Then round to two decimal places.) c. Choose the correct graph below. A. Option Value ($million) Value of Investment Opp Value of Entering Value of Company ($million) d. Choose the correct graph below. A. Beta 20- 15 30 50 Value ($million) O B. B. Option Value ($million) Value of Investment Opp Value of Entering Value of Company ($million) 25 20 15 10- 30 Value ($million) enter the business now. Beta D. C. Value of Investment Opp Option Value ($million) c. Value of Entering Value of Company ($million) D. 25- 20 20 Q 15 Beta 10 5 15 10 5- 30 40 Value ($million) Option Value ($million) Value of Investment Opp Value of Entering Q Value of Company ($million) Q 25 30 40 Value ($million) You alyst at Global Conglomerate and are considering entering the shoe business. You believe that you have a very narrow window for entering this market. Because of Christmas demand, the time is right today and you believe that exactly a year from now would also be a good opportunity. Other than these two windows, you do not think another opportunity will exist to break into this business. It will cost you $34 million to enter the market. Because other shoe manufacturers exist and are public companies, you can construct a perfectly comparable company. Hence, you have decided to use the Black-Scholes formula to decide when and if you should enter the shoe business. Your analysis implies that the current value of an operating shoe company is $39 million and it has a beta of 1. However, the flow of customers is uncertain, so the value of the company is volatile-your analysis indicates that the volatility is 26% per year. Fifteen percent of the value of the company is attributable to the value of the free cash flows (cash available to you to spend how you wish) expected in the first year. If the one-year risk-free rate of interest is 4%: a. should Global enter this business and, if so, when? b. how will the decision change if the current value of a shoe company is $35 million instead of $39 million? c. plot the value of your investment opportunity as a function of the current value of a shoe company. d. plot the beta of the investment opportunity as a function of the current value of a shoe company. a. The value of stock excluding dividends is $ million. (Do not round until the final answer. Then round to two decimal places.) The present value of the cost to enter the market is $7 million. (Do not round until the final answer. Then round to four decimal places.) The value of d is while the value of d (Do not round until the final answer. Then round to four decimal places.) The value of the option is $ million. (Do not round until the final answer. Then round to two decimal places.) So the value of waiting is $ million. The value of investing today is $ million. So the company (Do not round until the final answer. Then round to two decimal places.) b. The value of stock excluding dividends is $ . (Do not round until the final answer. Then round to two decimal places.) The value of d is while the value of d is (Do not round until the final answer. Then round to four decimal places.) The value of the option is $ million. (Do not round until the final answer. Then round to two decimal places.) So the value of waiting is $ million. The value of investing today is $ (Do not round until the final answer. Then round to two decimal places.) c. Choose the correct graph below. enter the business now. million. So the company enter the business now. You are a financial analyst at Global Conglomerate and are considering entering the shoe business. You believe that you have a very narrow window for entering this market. Because of Christmas demand, the time is right today and you believe that exactly a year from now would also be a good opportunity. Other than these two windows, you do not think another opportunity will exist to break into this business. It will cost you $34 million to enter the market. Because other shoe manufacturers exist and are public companies, you can construct a perfectly comparable company. Hence, you have decided to use the Black-Scholes formula to decide when and if you should enter the shoe business. Your analysis implies that the current value of an operating shoe company is $39 million and it has a beta of 1. However, the flow of customers is uncertain, so the value of the company is volatile-your analysis indicates that the volatility is 26% per year. Fifteen percent of the value of the company is attributable to the value of the free cash flows (cash available to you to spend how you wish) expected in the first year. If the one-year risk-free rate of interest is 4%: a. should Global enter this business and, if so, when? b. how will the decision change if the current value of a shoe company is $35 million instead of $39 million? c. plot the value of your investment opportunity as a function of the current value of a shoe company. d. plot the beta of the investment opportunity as a function of the current value of a shoe company. The value of d is while the value of d is . (Do not round until the final answer. Then round to four decimal places.) The value of the option is $ million. (Do not round until the final answer. Then round to two decimal places.) So the value of waiting is $ million. The value of investing today is $ million. So the company (Do not round until the final answer. Then round to two decimal places.) c. Choose the correct graph below. A. Option Value ($million) Value of Investment Opp Value of Entering Value of Company ($million) d. Choose the correct graph below. A. Beta 20- 15 30 50 Value ($million) O B. B. Option Value ($million) Value of Investment Opp Value of Entering Value of Company ($million) 25 20 15 10- 30 Value ($million) enter the business now. Beta D. C. Value of Investment Opp Option Value ($million) c. Value of Entering Value of Company ($million) D. 25- 20 20 Q 15 Beta 10 5 15 10 5- 30 40 Value ($million) Option Value ($million) Value of Investment Opp Value of Entering Q Value of Company ($million) Q 25 30 40 Value ($million)