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Energy Dynamic is a company with 10 million shares outstanding. The current asset value is $90m and it has a zero-coupon corporate debt of $100m
Energy Dynamic is a company with 10 million shares outstanding. The current asset value is $90m and it has a zero-coupon corporate debt of $100m face value due in 5 years. Suppose companys asset volatility is 25% and the risk-free interest rate is 6% per annum with continuous compounding. The company makes no dividend payment.
1)Apply the BlackScholes model to estimate companys equity value. What is the share price?
2)what is the yield to maturity on the debt?
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