How would the company ’ s share value and debt value change if the risk-free rate increased to 6%? Explain the significance of your results
How would the company ’ s share value and debt value change if the risk-free rate increased to 6%? Explain the significance of your results
Use your conclusions from the previous question. The market value of a utilities company is $3 billion, and their continuous annual standard deviation is 40%. 66 The company financed its assets through a zerocoupon bond with a face value of $2 billion, with interest and principle to be repaid in nine years. Assume that the company does not distribute dividends. 67 The risk-free interest rate is 4%. a. Calculate the value of the company ’ s shares as a call option on its assets. b. What is the market value of the company ’ s debt? c. How would the company ’ s share value and debt value change if the risk-free rate increased to 6%? Explain the significance of your results
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How would the company’s share and debt values change if the risk-free rate was raised to 6%? Describe the relevance of your findings.
How would the company’s share and debt values change if the risk-free rate was raised to 6%? Describe the relevance of your findings.
Apply your findings from the preceding question. A utilities company’s market worth is $3 billion, and its continuous yearly standard deviation is 40%. 66 The corporation financed its assets using a zero-coupon bond with a face value of $2 billion and a repayment period of nine years. Assume the corporation does not pay out dividends. 67 The risk-free interest rate is 4%. a. Determine the value of the company’s shares as
