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The value of company's equity is 10 million and volatility of the equity is 70%.The debt that will have to be repaid in 2 years
The value of company's equity is 10 million and volatility of the equity is 70%.The debt that will have to be repaid in 2 years is 10 million. The risk-free rate is 5% p.a. A)Estimate the current value of the firm and the distance to default. B)If the expected growth rate in assets is 7.5% and short term debt comprises of 20% of the total debt , estimate the Expected Default Frequency using KMV model.
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