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The company recently reorganized its debt structure at no extra expense, consolidating all liabilities into a single bond maturing in precisely 5 years. This strategic
The company recently reorganized its debt structure at no extra expense, consolidating all liabilities into a single bond maturing in precisely 5 years. This strategic move involved issuing new debt in an amount sufficient to retire all existing current liabilities and the long-term debt. Consequently, your Balance Sheet now solely consists of Owner's Equity and Long Term Debt. Present estimates suggest that the Market Value of the firm's assets stands at $40 million, with an approximate standard deviation of 23%. What are the Market Value numbers for the Equity and Debt? Use the same risk free rate assumption as in question 3 (d)
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