Question
An all-equity firm has the following expected values in one year, depending on the state of the economy: State Recession Boom Probability 0.5 0.5
An all-equity firm has the following expected values in one year, depending on the state of the economy: State Recession Boom Probability 0.5 0.5 Expected firm value 80 160 The firm's cost of capital is 18%. Part 3 Attempt 2/3 for 8 pts. From now on, assume that you want to borrow $90 for one year to buy the firm. The quoted interest rate on the loan is 10%. What is the face value of the bond? 99 Part 4 What is the expected value of the bond in one year? 0+ decimals Submit Attempt 1/3 for 10 pts. Part 5 What is the expected rate of return on the bond? | Attempt 1/3 for 10 pts. 4+ decimals Submit
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Entrepreneurial Finance
Authors: J . chris leach, Ronald w. melicher
4th edition
538478152, 978-0538478151
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