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Any help is greatly appreciated!! Use the following information to value a firm's assets. Assume the following: the market value of the firm's assets is
Any help is greatly appreciated!!
Use the following information to value a firm's assets. Assume the following: the market value of the firm's assets is expected to remain constant over time so the firm doesn't grow and can be valued as a level perpetuity, the firm has a constant debt-to-assets ratio, the bonds are priced at par, and the stock's expected capital returns are zero. Relevant data: The number of shares on issue is 1 million and the number of bonds is 800,000 The constant annual dividend per share is $3 The bonds have an annual fixed coupon payment of $2.50 10-year government bonds have a yield of 2% and the market risk premium is 5% The beta of levered equity is 1.2 The beta of the bonds is 0.9 Which of the following is the market value of the levered firm's assets? O a. $70.1 million O b. $68.3 million c. $21.2 million O d. $42.9 million e. $54.7 millionStep by Step Solution
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