Have major corporations been unwilling to adapt to the times and meet competition head on? Are corporate executives better described as risk-averse managers than entrepreneurs willing to take a chance?© BrainMass Inc. brainmass.com October 17, 2018, 12:11 pm ad1c9bdddf
Major corporations have been unwilling to adapt to times and meet competition head on. These corporations are inflexible and do not have the ability to compete head on. The corporations have high overheads that they are not able to reduce them. Their decision making is slow and bureaucratic procedures make them incapable of meeting competition head on. To adapt to the times, major corporations have to change quickly and major corporations find change difficult. Major corporations also avoid meeting competition head on because they have easy options. They use monopoly power and use anti-competitive practices. Some use dumping, some use exclusive dealing agreements, and others use refusal to deal strategies. Major corporations avoid meeting competition head on because they use their strength and size to force out ...
Avoidance of competition and risk taking are explained in a structured manner in this response. The answer includes references used.
Considering Executive Stock Options
Gary Levin is the chief executive officer of Mountainbrook Trading Company. The board of directors has just granted Mr. Levin 20,000 at-the-money European call options on Mountainbrook's stock, which is currently trading at $50 per share. Mountainbrook's stock pays no dividends. The options will expire in 4 years, and the annual variance of the continuously compounded returns on Mountainbrook's stock is 0.25. Treasury bills that mature in four years currently yield a continuously compounded interest rate of 6 percent per annum.
1. Use the Black-Scholes model to calculate the value of Mr. Levin's stock options.
2. You are Mr. Levin's financial adviser. He must choose between the previously mentioned stock option package and an immediate $450,000 bonus. If he is risk-neutral, which would you recommend?
3. How would your answer to (b) change if Mr. Levin were risk-averse and he could not sell the options prior to expiration?