Question
Firm WHOA is a one-year firm that produces a single cash flow next year. In the good state, the assets produce $40M and in the
Firm WHOA is a one-year firm that produces a single cash flow next year. In the good state, the assets produce $40M and in the bad state the assets produce $18M. The two states are equally likely. The firm owes $20M in debt next year and has no other debt outstanding. If the firm defaults, it must pay $2M in legal fees and other bankruptcy costs. The firm has an asset beta of 0.95 and a debt beta of 0.10. Assume a risk free rate of 3 percent, the market risk premium is 8 percent, and that there are 2M shares outstanding.
What is WHOAs current stock price?
A.3.99
B.8.00
C.12.66
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The Blockchain Developer A Practical Guide For Designing Implementing Publishing Testing And Securing Distributed Blockchain Based Projects
Authors: Elad Elrom
1st Edition
1484248465, 978-1484248461
