ECO 389 CORPORATE FINANCE / TUTORIALOUTLET DOT COM
ECO 389 Corporate Finance
FOR MORE CLASSES VISIT
PROBLEM SET 13
ECO389 – SPRING 2017
Instructor: Ramiro Malaga
Due date: Friday 28th, April 2017 at 11:00 p.m.
You will have two attempts, only the last will be valid.
Why does a discounted cash-flow approach to options valuation not work?
A. It is impossible to estimate expected cash flows.
B. One cannot find the appropriate interest rate for an infinitely small
C. Finding the opportunity cost of capital is impossible as the risk of
options changes every time the stock price moves.
D. The strike price of options changes.