Equity value

a)21.16 million

b)20.04 million

c)23.38 million

d)22.27 million

Debt value

a)9.96m

b)7.73m

c)8.84m

d)6.62m

Debt yield

a)9.84%

b)9.19%

c)9.65%

d)9.93%

13. Equity as an option Green Goose Automation is a manufacturing firm. Green Goose's current value of operations, including debt and equity, is estimated to be $30 million Green Goose has $12 million face-value zero coupon debt that is due in five years. The risk-free rate is 6%, and the volatility of companies similar to Green Goose is 50%. Green Goose's performance has not been very good as compared to previous years. Because the company has debt, it will repay its loon, but the company has the option of not paying equity holders. The ability to make the decision of whether to pay or not looks very much like an option. Based on your understanding of the Black Scholes option pricing model (OPM), calculate the following values and complete the table. (Note: Use 2.7183 as the approximate value of e in your calculations. Do not round intermediate calculations. Round final answers to two decimal places) Values: Green Goose Automation Equity value Debt value Debt yield Green Goose's management is implementing a risk management strategy to reduce its volatility Complete the following table, assuming that the goal is to reduce the company's volatility to 30%. (Note: Dor Round final answers to two decimal places.) Goals: Green Goose Automation Equity value at 30% volatility Debt value at 30% volatility $19.13 million Debt yield at 30% volatility $22.32 million Complete the following sentence, a $20.20 million en Goose's risk management strategy is successful. If its risk management strategy is $21.26 million reen Goose can reduce its volatility, the value of Green God value of its debt will Grade it pe here to search O Complete the following table, assuming that the goal is to reduce the company's volatility to 30%. (Note: Do no Round final answers to two decimal places.) Goals: Green Goose Automation Equity value at 30% volatility Debt value at 30% volatility Debt yield at 30% volatility $9.80 million $10.87 million Complete the following sentence, a en Goose's risk management strategy is successful. $7.68 million If its risk management strategy is value of its debt will reen Goose can reduce its volatility, the value of Green Goos $8.74 million Grade IN Type here to search O 3 Green Goose's management is implementing a risk management strategy to reduce its volatility. Complete the following table, assul 6.81% the goal is to reduce the company's volatility to 30%. (Note: Don Round final answers to two decima 6.41% Goals: Green Goose Automatid 6.68% Equity value at 30% volatility Debt value at 30% volatility Debt yield at 30% volatility 6.55% Complete the following sentence, assuming that Green Goose's risk management strategy is successful If its risk management strategy is successful and Green Goose can reduce its volatility, the value of Green Goc value of its debt will Grade It Type here to search ORI 13. Equity as an option Green Goose Automation is a manufacturing firm. Green Goose's current value of operations, including debt and equity, is estimated to be $30 million Green Goose has $12 million face-value zero coupon debt that is due in five years. The risk-free rate is 6%, and the volatility of companies similar to Green Goose is 50%. Green Goose's performance has not been very good as compared to previous years. Because the company has debt, it will repay its loon, but the company has the option of not paying equity holders. The ability to make the decision of whether to pay or not looks very much like an option. Based on your understanding of the Black Scholes option pricing model (OPM), calculate the following values and complete the table. (Note: Use 2.7183 as the approximate value of e in your calculations. Do not round intermediate calculations. Round final answers to two decimal places) Values: Green Goose Automation Equity value Debt value Debt yield Green Goose's management is implementing a risk management strategy to reduce its volatility Complete the following table, assuming that the goal is to reduce the company's volatility to 30%. (Note: Dor Round final answers to two decimal places.) Goals: Green Goose Automation Equity value at 30% volatility Debt value at 30% volatility $19.13 million Debt yield at 30% volatility $22.32 million Complete the following sentence, a $20.20 million en Goose's risk management strategy is successful. If its risk management strategy is $21.26 million reen Goose can reduce its volatility, the value of Green God value of its debt will Grade it pe here to search O Complete the following table, assuming that the goal is to reduce the company's volatility to 30%. (Note: Do no Round final answers to two decimal places.) Goals: Green Goose Automation Equity value at 30% volatility Debt value at 30% volatility Debt yield at 30% volatility $9.80 million $10.87 million Complete the following sentence, a en Goose's risk management strategy is successful. $7.68 million If its risk management strategy is value of its debt will reen Goose can reduce its volatility, the value of Green Goos $8.74 million Grade IN Type here to search O 3 Green Goose's management is implementing a risk management strategy to reduce its volatility. Complete the following table, assul 6.81% the goal is to reduce the company's volatility to 30%. (Note: Don Round final answers to two decima 6.41% Goals: Green Goose Automatid 6.68% Equity value at 30% volatility Debt value at 30% volatility Debt yield at 30% volatility 6.55% Complete the following sentence, assuming that Green Goose's risk management strategy is successful If its risk management strategy is successful and Green Goose can reduce its volatility, the value of Green Goc value of its debt will Grade It Type here to search ORI