Question
Currently Novavax has zero-coupon debt that requires them to pay back $18,000,000 two years from now. Given this loan, the market value of Novavax Inc.s
Currently Novavax has zero-coupon debt that requires them to pay back $18,000,000 two years from now. Given this loan, the market value of Novavax Inc.s equity is $5,000,000 and has a volatility of 55% per year. The annual risk-free rate is .02 at all maturities. Novavax has no other debt. What are the estimates of the following values for Novavax based on the Merton Model? Provide a spreadsheet. Volatility of Assets (_V) = _______________ Value of Assets (V0) = _________________ Market Value of the Debt now = _________________ Required return on Debt now = ____________________________ Value of Debt if it is risk free = _________________ Expected Loss from default = __________________ Probability of default on the debt = _______________ Expected recovery rate on the debt = __________________.
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