Create a Case Analysis and Write-up
Case: Dell Computer Corporation: Share Repurchase Program (9-200-056)
Write-up should include answers to the following questions:
• Why do companies use stock options to compensate employees?
• What are the advantages of stock options relative to cash compensation?
• What are their disadvantages?
• What risks might Dell’s shareholders face from Dell’s stock option program? Is this risk something that shareholders of Dell expect to bear when investing in Dell?
• How does Dell remove or hedge the perceived risk of the stock options program for shareholders?
• Why does dell transact in both call options and put options?
• What do Dell’s call and put positions accomplish?
• Is risk management the primary motivation for Dell’s actions
Include terminal payoff diagrams to illustrate the risks of the stock option program and the hedging program. Refer to any intermediate finance text’s section on options for examples of these types of diagram.
The paper should be in the form of a narrative, not as discrete answers to the above questions. One option would be an interoffice memo regarding the two programs, 5-7 pages. Be thorough, but concise and succinct and be sure to have support for any subjective statements.
Please: Times New Roman, 12pt, double spaced, file labeled BFIN635_LastNameFirstInitial-1, acceptable file extensions: .doc, .docx, .rtf, .pages – DO NOT SUBMIT AS A PDF. Include a reference page with at least 4 references in APA seventh addition format
