Sunlife Company has a $18,000 pure discount bond that comes due in one year. The risk-free rate of return is 3 percent. The firm's assets are expected to be worth either $16,000 or $21,000 in one year. Currently, these assets are worth $19,000. What is the current value of the firm's debt? $15,807.64 $16,920.39 $16,454.78 $15,398.20 $17,530.66
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ANSWER : $16920.39
Sunlife Company has a $18,000 pure discount bond that comes due in one year. The risk-free...
Princeton Media has a $5,000 pure discount bond that comes due in one year. The risk-free rate of return is 4 percent. The firm's assets are expected to be worth either $4,600 or $6,600 in one year. Currently, these assets are worth $6,000. What is the current value of the firm's debt? $4,140.88 $4,738.46 $5,318.62 $4,409.21 $5,076.33
Buckeye Industries has a bond issue with a face value of $1,000
that is coming due in one year. The value of the company’s assets
is currently $1,200. Urban Meyer, the CEO, believes that the assets
in the company will be worth either $950 or $1,470 in a year. The
going rate on one-year T-bills is 2 percent.
Buckeye Industries has a bond issue with a face value of $1,000 that is coming due in one year. The value of...
Buckeye Industries has a bond issue with a face value of $1,000 that is coming due in one year. The value of the company's assets is currently $1,260. Urban Meyer, the CEO, believes that the assets in the company will be worth either $890 or $1,410 in a year. The going rate on one-year T-bills is 5 percent. a-1. What is the value of the company's equity? (Do not round intermediate calculations and round your answer to 2 decimal places,...
Buckeye Industries has a bond issue with a face value of $1,000 that is coming due in one year. The value of the company's assets is currently $1,230. Urban Meyer, the CEO, believes that the assets in the company will be worth either $920 or $1,440 in a year. The going rate on one-year T-bills is 6 percent. a-1. What is the value of the company's equity? (Do not round intermediate calculations and round your answer to 2 decimal places,...
og 24 15 Company X has these debt liabilities: $2MM bond maturing in 10 years, with IRR = 5%. $3MM loan due in 3 years, with IRR = 8%. The company has no other debt and its tax rate is 25%. What is the firm's post- tax cost of debt capital? 03 25 15 A stock has a beta of 0.9, the expected return on the market (rm) is 8 percent, and the risk-free rate is 2 percent. What is...
1. A risk-free bond has a $200 face value in one year and the nominal interest rate is 7%. What is the price of the bond today? 2. A risk-free bond has a face value of $500 in one year, the price of the bond today is $472. a. What is the rate of return (yield) on the bond? b. If the expected rate of inflation is 2%, what is the real interest rate? 3. a. Show the supply and...
Sunburn Sunscreen has a zero coupon bond issue outstanding with a $10,000 face value that matures in one year. The current market value of the firm's assets is $11.900. The standard deviation of the return on the firm's assets is 28 percent per year. Frostbite Thermalwear has a zero coupon bond issue outstanding with a face value of $44,000 that matures in one year. The current market value of the firm's assets is $47,600. The standard deviation of the return...
6. A one-year risk free bond with a face value of $500 has a price of $470. The expected inflation rate is 2%. What is the real interest rate and what is the nominal interest rate?
HW on Credit Models 1. Assume a company with total assets of $2,000 issues a zero coupon bond of $1,500 par value and one-year maturity. The risk-free rate of return is 2% and the rate of return on the firm's assets is 5%. The assets return volatility is 36%. a) Calculate the value of the bond using structural model. b) Calculate the expected loss on the bond and present value of expected loss. c) Assume the hazard rate (A) is...
Rackin Pinion Corporation’s assets are currently worth $1,170. In one year, they will be worth either $1,130 or $1,420. The risk-free interest rate is 5 percent. Suppose the company has an outstanding debt issue with a face value of $1,000. a. What is the value of the equity? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Equity value $ b-1 What is the value of the debt? (Do not round intermediate calculations and...