A firm has assets of $21.8 million and a 3-year, zero-coupon, risky bonds with a total face value of $8.5 million.

For the equity of a firm to be considered a call option on the firm's assets, the firm must:    A.  be in default. B.  be leveraged. C.  pay dividends. D.  have a negative cash flow from operations. E.  have a negative cash flow from assets. Refer to section 25.4

39.	Paying off a firm's debt is comparable to _____ on the assets of the firm.    A.  purchasing a put option B.  purchasing a call option C.  exercising an in-the-money put option D.  exercising an in-the-money call option E.  selling a call option Refer to section 25.4

40.	The shareholders of a firm will benefit the most from a positive net present value project when the delta of the call option on the firm's assets is:    A.  equal to one. B.  between zero and one. C.  equal to zero. D.  between zero and minus one. E.  equal to minus one. Refer to section 25.4

41.

The value of the risky debt of a firm is equal to the value of:    A.  a call option plus the value of a risk-free bond. B.  a risk-free bond plus a put option. C.  the equity of the firm minus a put. D.  the equity of the firm plus a call option. E.  a risk-free bond minus a put option. Refer to section 25.4

42.

A firm has assets of $21.8 million and a 3-year, zero-coupon, risky bonds with a total face value of $8.5 million. The bonds have a total current market value of $8.1 million. How can the shareholders of this firm change these risky bonds into risk-free bonds?    A.  purchase a call option with a 1-year life and a $8.1 million face value B.  purchase a call option with a 5-year life and a $8.5 million face value C.  purchase a put option with a 1-year life and a $21.8 million face value D.  purchase a put option with a 3-year life and a $8.1 million face value E.  purchase a put option with a 3-year life and an $8.5 million face value Refer to section 25.4