Week4 assignments

Here are the assignments for week 4 (April 4, 6). To complete your answer you'll want to read Chapter 4 (Securites Valuation) on the course website.

Monday, Apr 4 (due Sunday, 6:00 pm)

Please prepare a 3-4 page memo on the Met Life v. RJR-Nabisco case. Explain why the bond prices had fallen as a result of the the LBO. Assess whether the court correctly decided the plaintiffs' claims. Are bondholders adequately protected by the law, at least as understood by the court? Why would a poison put have helped the bondholders - how would you value a poison put? (Remember please include both a textual and a spreadsheet answer to these questions). You can find the case in 4.3.5 Relation between Stockholders and Bondholders Email your memo to me as an attachment (preferably Word, with any spreadsheet imbedded in Word).

Wednesday, Apr 6(due Tuesday, 6:00 pm)

Please prepare a 3-4 page memo on the Brehm v. Eisner case. Expalin how the stock options granted Ovitz worked and how they should have been valued. Consider whether the board's compensation committee failed in its role. Did the court adequately review the committee's and board's decision? What should be the responsibility of board members on a corporation's compensation committee? How do you think executive stock options should be valued and reviewed by courts? (Remember please include both a textual and a spreadsheet answer to these questions). You can find the case in 4.4.3 Option Applications

As always, I invite your proofreading and "click" reading suggestions.