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Marshall Corporation has a zero coupon bond that matures in five years with a face value of $75,000. The current value of the company's assets
Marshall Corporation has a zero coupon bond that matures in five years with a face value of $75,000. The current value of the company's assets is $71,000, and the standard deviation of its return on assets is 34 percent per year. The risk-free rate is 7 percent per year, compounded continuously. a. What is the value of a risk-free bond with the same face value and maturity as the current bond? (Do not round intermedlate calculatlons and round your answer to 2 decimal places, e.g., 32.16.) b. What is the value of a put option on the firm's assets with a strike price equal to the face value of the debt? (Do not round Intermedlate calculations and round your answer to 2 decimal places, e.g., 32.16.) c-1. Using the answers from (a) and (b), what is the value of the firm's debt? (Do not round Intermedlate calculations and round your answer to 2 decimal places, e.g., 32.16.) c-2. What is the continuously compounded yleld on the company's debt? (Do not round Intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) d-1. Assume the company can restructure its assets so that the standard deviation of its return on assets increases to 43 percent per year. What is the new value of the company's debt? (Do not round Intermedlate calculations and round your answer to 2 decimal places, e.g., 32.16.) d-2. What is the new continuously compounded yleld on the debt? (Do not round Intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) e-1. If the company restructures its assets, how much will bondholders gain or lose? (A loss should be indlcated by a minus sign. Do not round Intermedlate calculations and round your answer to 2 decimal places, e.g., 32.16.) e-2. If the company restructures its assets, how much will stockholders gain or lose? (A loss should be Indlcated by a minus sign. Do not round Intermedlate calculations and round your answer to 2 decimal places, e.g., 32.16.)
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