The Gain on a Call Is Computed As

question 29

Multiple Choice

The gain on a call is computed as:

• A)[Firm's value net of debt + Exercise price(N_w)]/(N + N_w).
• B)[Firm's value net of debt + Exercise price(N_w)]/N.
• C)Firm's value net of debt/N − Exercise price.
• D)Firm's value net of debt/(N + N_w)− Exercise price.
• E)(Firm's value net of debt − Exercise price)/N.

---

Definitions:

Lease Residual Value

The estimated value of a leased asset at the end of the lease term.

Loss on Sale

Occurs when the sale price of an asset is less than its carrying amount on the books.

Treasury Shares

Stocks that the original issuing company repurchased, subsequently decreasing the quantity of available shares in the market.