BLW Corporation Is Considering the Terms to Be Set on the Options

question 16

Multiple Choice

BLW Corporation is considering the terms to be set on the options it plans to issue to its executives.Which of the following actions would decrease the value of the options, other things held constant?

• A) The exercise price of the option is increased.
• B) The life of the option is increased, i.e., the time until it expires is lengthened.
• C) The Federal Reserve takes actions that increase the risk-free rate.
• D) BLW's stock price becomes more risky (higher variance).
• E) BLW's stock price suddenly increases.

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Definitions:

Salvage Value

The anticipated end-of-use life resale worth of an asset, factored into depreciation estimations.

Book Value

The net value of a company's assets as recorded on the balance sheet, calculated by subtracting total liabilities from total assets.

Useful Life

The projected timeframe during which an asset is anticipated to remain functional for its designed use.

Report Form Balance Sheet

A type of balance sheet presentation where the assets, liabilities, and equity sections are presented vertically or in a list format.