Business, 23.02.2020 05:11 soccerlyfe6839

(Expected return calculation) "DEF" is a firm that is traded on NASDAQ. On 1/1/2014, the company issued 10,000 zero coupon bonds. Each bond has a face value of $100 and matures on 1/1/2019. The bonds are the only debt of the company. A bond rating company estimated the total value of the DEF's assets on 1/1/2019 as follows:
Probability Value of DEF assets on 1/1/2019
0.2 2,000,000
0.3 1,750,000
0.4 1,200,000
0.1 1,000,000

Two years after the bond issue, on 1/1/2016, the bond rating agency reexamined the DEF Company and estimated the total value of the firm's assets as follows:

Probability Value of DEF assets on 1/1/2019
0.05 2,000,000
0.25 1,750,000
0.65 1,200,000
0.05 1.000.000
a. What will be the influence of the new probability distribution on the expected return on DEF bonds?
b. What will be the influence of the new estimation on the DEF stock price, assuming the cost of capital for the stock holders is 15%?

Answers: 1

Show answers

Another question on Business

Business, 22.06.2019 04:00

Match the type of agreements to their descriptions. will trust living will prenuptial agreement

Answers: 2

Answer

Business, 22.06.2019 18:30

Amanufacturer has paid an engineering firm $200,000 to design a new plant, and it will cost another $2 million to build the plant. in the meantime, however, the manufacturer has learned of a foreign company that offers to build an equivalent plant for $2,100,000. what should the manufacturer do?

Answers: 1

Answer

Business, 22.06.2019 22:40

Rolston music company is considering the sale of a new sound board used in recording studios. the new board would sell for $27,200, and the company expects to sell 1,570 per year. the company currently sells 2,070 units of its existing model per year. if the new model is introduced, sales of the existing model will fall to 1,890 units per year. the old board retails for $23,100. variable costs are 57 percent of sales, depreciation on the equipment to produce the new board will be $1,520,000 per year, and fixed costs are $1,420,000 per year.if the tax rate is 35 percent, what is the annual ocf for the project?

Answers: 1

Answer

Business, 23.06.2019 01:00

Weekly sales at nancy's restaurant total $ 84,000. labor required is 420 hours at a cost of $21,000. raw materials used amount to $40,000. what is the partial measure of productivity for labor hours?

Answers: 1

Answer

You know the right answer?

(Expected return calculation) "DEF" is a firm that is traded on NASDAQ. On 1/1/2014, the company iss...

Questions