Using the Black-Scholes Option Pricing Model . . . What is the Excel function and calculations to find the answers to question d face value of debt, and e find Volatility face value of debt. See my uploaded file name: Week 7, Chapter 14 and 15 for additional information needed to complete computations. Thank you!

Black-Scholes Option Pricing Model

Total Value of Firm 200.00 this is the current value of operations

Face Value of Debt 110.00

Risk Free rate 5%

Maturity of debt (years) 3.00

Standard Dev. 0.60 this is sigma--also known as volatility

d₁ 1.2392 use the formula from the text

d₂ 0.2000 use the formula from the text

N(d₁) 0.8924 use the Normsdist function in the function wizard

N(d₂) 0.5793

Call Price = Equity Value $123.63 million

b. Debt value = Total Value - Equity Value =$76.37 million

Debt yield =2.934%

c. Equity value at 60% volatility 128.76748 million

Equity value at 45% volatility 120.85314 million

Percent change -6.1% million

e. (Need help finding excel function and computations here)

Face Value of Debt 12.934% hint:use a data table

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f. (Need help finding excel function and computations here)

Value of Debt, Value of Equity:$76.37 face value: $110.00

Volatility Face Value of Debt Volatility Face Value of Debt$123.63 face value: 110.00

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