The Value of the Firm (V) is $780 million, the Face Value of the Debt (B) is
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The Value of the Firm (V) is $780 million, the Face Value of the Debt (B) is
$410 million, the time to maturity of the debt (t) is 1.37 years, the riskfree rate ( RF k ) is 3.2%, and the standard deviation of the return on the firm’s assets (σ) is 43.0%. Using both methods of debt and equity valuation, what is the firm’s Equity Value (E) and Risky Debt Value (D)? Do both methods produce the same result?
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