Bonds Stock Zeresh Tree Products (ZTP) has the following capital structure and prices. Coupon Maturity Price 6.50% 6/20/2027 65 $4.00 Outstanding 600,000 20,000 You believe normalized EBITDA is $75 million and the right multiple for the business is 6.0x EBITDA. You decide the bonds are cheap and that the equity is way over-valued. You want to buy $10 million (face) bonds and sell some stock. Your model indicates that the absolute best the stock can do is to rally to $10 per share. a) How many shares do you sell short to assure no losses in a bull case scenario? What is your Short Market Value (SMV)? What is your LMV?, b) Assume the stock is worth zero in a bear case scenario, where did you "create" your long bond position in that case? (in bond points) The bonds are callable at par, ignore interest entirely.