A finance manager is overseeing a plan to issue $900,000,000 of new debt repayable in 5...
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A finance manager is overseeing a plan to issue $900,000,000 of new debt repayable in 5 years. Recent market shifts have resulted in the risk-free rate for 5-year T-Bills increasing to 4.25%. The business has been able to pay off all previous debt. Shares issued and outstanding amount to 60,000,000. The current market price for shares is $36 versus a book value per share of $28. Current call option pricing for a 5-year term is $25.00. In assessing the fairness of the proposal, calculate the risk premium assigned to your firm. a) Calculate the risk premium assigned to the company. A finance manager is overseeing a plan to issue $900,000,000 of new debt repayable in 5 years. Recent market shifts have resulted in the risk-free rate for 5-year T-Bills increasing to 4.25%. The business has been able to pay off all previous debt. Shares issued and outstanding amount to 60,000,000. The current market price for shares is $36 versus a book value per share of $28. Current call option pricing for a 5-year term is $25.00. In assessing the fairness of the proposal, calculate the risk premium assigned to your firm. a) Calculate the risk premium assigned to the company.
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Answer rating: 100% (QA)
Heres how to calculate the risk premium assigned to the firm 1 Estimate the cost of debt capital Kd We know the riskfree rate Rf for 5year TBills is 4... View the full answer
Related Book For
International Marketing And Export Management
ISBN: 9781292016924
8th Edition
Authors: Gerald Albaum , Alexander Josiassen , Edwin Duerr
Posted Date:
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