Question

3) A company’s market-to-book ratio is higher than peer firms (comparable firms). Which of the following is most

likely to be the case? (ceteris peribus – meaning, all else equal!)

i)Growth opportunities for this company is higher

ii)The Debt-to-Equity ratio for this firm is higher

iii)The current period’s free cash flows are lower

iv)The degree of operating leverage for this company is lower

9) Equity value can be seen as…

i)A put option on the value of the firm with a strike price of the book value of debt

ii)A call option on the value of the firm with a strike price of the book value of debt

iii)A put option on the value of the firm with a strike price of the market value of debt

iv)A call option on the value of the firm with a strike price of the market value of debt

v)The value of the firm

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