For some of the firm’s securities that can be viewed as options, which of the following is most likely to be true? A) All else equal, the higher the company’s leverage, the more valuable the company’s equity as an option. B) Projects that raise the firm’s asset volatility will automatically increase the value of the firm’s equity and risky debt. C) For convertible bond, the option to convert equals to the conversion value minus the value of the equivalent straight bond without the conversion option. D) Owning a warrant is the same as selling a call option. E) If the company’s bond is considered risky, the company’s equity can be viewed as a put option on the company’s assets.

Exercise 18-15 sheffield appliance center is an experienced home appliance dealer. sheffield appliance center also offers a number of services for the home appliances that it sells. assume that sheffield appliance center sells ovens on a standalone basis. sheffield appliance center also sells installation services and maintenance services for ovens. however, sheffield appliance center does not offer installation or maintenance services to customers who buy ovens from other vendors. pricing for ovens is as follows. oven only $790 oven with installation service 850 oven with maintenance services 970 oven with installation and maintenance services 990 in each instance in which maintenance services are provided, the maintenance service is separately priced within the arrangement at $180. additionally, the incremental amount charged by sheffield appliance center for installation approximates the amount charged by independent third parties. ovens are sold subject to a general right of return. if a customer purchases an oven with installation and/or maintenance services, in the event sheffield appliance center does not complete the service satisfactorily, the customer is only entitled to a refund of the portion of the fee that exceeds $790. assume that a customer purchases an oven with both installation and maintenance services for $990. (b) indicate the amount of revenue that should be allocated to the oven, the installation, and to the maintenance contract.