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please show all work! Acort Industries owns assets that will have an 80% probability of having a market value of $50 million in one year.
please show all work!
Acort Industries owns assets that will have an 80% probability of having a market value of $50 million in one year. There is a 20% chance that the assets will be worth only $20 million. The current risk-free rate is 5%, and Acort's assets have a cost of capital of 10%. a. If Acort is unlevered, what is the current market value of its equity? Question 7 1 pts b. Suppose instead that Acort has debt with a face value of $20 million due in one year. According to MM, what is the value of Acort's equity in this case? (Note: There is no interest on the debt paid this or next year, just the repayment of $20M next year.) Step by Step Solution
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