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Given the following parameters with B-barre (maturity value of debt/bond aka. promised payment on debt), A 0 (assets values of the firm), r (risk-free rate),
Given the following parameters with B-barre (maturity value of debt/bond aka. promised payment on debt), A0 (assets values of the firm), r (risk-free rate), (volatility of the firm's assets), (payout rate from the firm e.i., dividend yield), show each steps required (by hand, using formulas and rounding to two decimal place) to find the given market value of firm's assets (E0 = $27.07).
= = Example 16.2 Suppose that B = $100, A0 = $90, r =6%, o = 25%, 8=0 (the firm makes no payouts), and T = 5 years. We have Eo = BSCall($90, $100,0.25, 0.06, 5, 0) = $27.07Step by Step Solution
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