A Share of Stock Can Be Thought of as a Put

question 36

True/False

A share of stock can be thought of as a put option on the firm's assets with a strike price equal to the face value of debt.

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Definitions:

150%-Declining-Balance

A method of accelerated depreciation which computes depreciation expense at 150% of the straight-line rate.

Depreciation

The accounting method of allocating the cost of a tangible or physical asset over its useful life.

Residual Value

The projected worth of an asset upon the completion of its lifespan.

Composite Depreciation

A method of depreciation where a single depreciation rate is applied to the aggregate cost of multiple assets with similar characteristics and useful lives.