Calculating the Yield on New Corporate Debt PROBLEM As of December 2021, Buffin Corp. (ticker: BUFN) had no debt. Suppose the firm's managers consider recapitalizing the firm at the start of the new year by issuing zero-coupon debt with a face value of $90 billion due in January of 2024 , and using the proceeds to pay a special dividend. Suppose Buffin currently has 300 million shares outstanding trading at $405.85 per share, implying a market value of $121.8 billion. The two-year risk-free rate is 4.5% per year. Using the option market data in Figure 14.10, estimate the credit spread Buffin will have to pay on the debt. Figure 14.10 Buffin Call Option Quotes for Options Expiring in January 2024 27. Return to Example 14.11 , in which Buffin Corp. was contemplating issuing zero-coupon debt due in two years with a face value of $90 billion and using the proceeds to repurchase stock. Buffin currently has a market value of $121.8 billion, and the two-year risk-free rate is 4.5% (EAR). Using the market data in Figure 14.10, a. If Buffin's current equity beta is 1.45 , estimate Buffin's equity beta after the debt is issued. b. Estimate the beta of the new debt