Question
Buckeye Industries has a bond issue with a face value of $1,000 that is coming due in one year. The value of Buckeyes assets is
Buckeye Industries has a bond issue with a face value of $1,000 that is coming due in one year. The value of Buckeyes assets is currently $1,130. Urban Meyer, the CEO, believes that the assets in the firm will be worth either $960 or $1,420 in a year. The going rate on one-year T-bills is 3 percent. a-1 What is the value of the companys equity? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Value of equity $ a-2 What is the value of the debt? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Value of debt $ Suppose the company can reconfigure its existing assets in such a way that the value in a year will be $840 or $1,640. b. If the current value of the assets is unchanged, what is the new value of the company's equity? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Value of equity $
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