Question
Burtons Inc., was taken private through an LBO transaction many years ago. The company is now carrying a considerable amount of debt in the form
Burtons Inc., was taken private through an LBO transaction many years ago. The company is now carrying a considerable amount of debt in the form of a zero-coupon bond with a face value of $3.0B which needs to be repaid in three years. The estimated market value of the Burtons underlying business is $2.5B, and the volatility of the underlying business is 35.0%.
Using a risk-free rate of 1.5%:
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What is the equity worth in this business?
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What if the value of the debt
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What is the yield to maturity of the debt?
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Fundamentals Of Corporate Finance
Authors: Jonathan Berk, Peter DeMarzo, Jarrad Harford
5th Edition
9780135811603
