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Can anyone help me out? I have been thinking for a long time. Thanks very much! P4 You have a company with $100 in assets.

Can anyone help me out? I have been thinking for a long time. Thanks very much!

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P4 You have a company with $100 in assets. The company has zero-coupon debt with face value of 70 maturing in 3 years. The risk free rate is 1%. The assets could grow up to 200 or down to 50 in 3 years. The probability of assets going up is 70%. If 30 of assets were idle cash earning the risk free interest rate and the company decides to pay them out in dividends. What would be the effect on the market value of debt and equity? P4 You have a company with $100 in assets. The company has zero-coupon debt with face value of 70 maturing in 3 years. The risk free rate is 1%. The assets could grow up to 200 or down to 50 in 3 years. The probability of assets going up is 70%. If 30 of assets were idle cash earning the risk free interest rate and the company decides to pay them out in dividends. What would be the effect on the market value of debt and equity

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