Bonds Stock Zeresh Tree Products (ZTP) has the following capital structure and prices. Coupon Maturity Price...
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Bonds Stock Zeresh Tree Products (ZTP) has the following capital structure and prices. Coupon Maturity Price 6.50% 6/20/2027 65 $4.00 Outstanding 600,000 20,000 You believe normalized EBITDA is $75 million and the right multiple for the business is 6.0x EBITDA. You decide the bonds are cheap and that the equity is way over-valued. You want to buy $10 million (face) bonds and sell some stock. Your model indicates that the absolute best the stock can do is to rally to $10 per share. a) How many shares do you sell short to assure no losses in a bull case scenario? What is your Short Market Value (SMV)? What is your LMV?, b) Assume the stock is worth zero in a bear case scenario, where did you "create" your long bond position in that case? (in bond points) The bonds are callable at par, ignore interest entirely. Bonds Stock Zeresh Tree Products (ZTP) has the following capital structure and prices. Coupon Maturity Price 6.50% 6/20/2027 65 $4.00 Outstanding 600,000 20,000 You believe normalized EBITDA is $75 million and the right multiple for the business is 6.0x EBITDA. You decide the bonds are cheap and that the equity is way over-valued. You want to buy $10 million (face) bonds and sell some stock. Your model indicates that the absolute best the stock can do is to rally to $10 per share. a) How many shares do you sell short to assure no losses in a bull case scenario? What is your Short Market Value (SMV)? What is your LMV?, b) Assume the stock is worth zero in a bear case scenario, where did you "create" your long bond position in that case? (in bond points) The bonds are callable at par, ignore interest entirely.
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Bonds Information Coupon 650 Maturity 6202027 Price 6500 Outstanding 600000 Face value 400 Equity In... View the full answer
Related Book For
Financial Accounting an introduction to concepts, methods and uses
ISBN: 978-0324789003
13th Edition
Authors: Clyde P. Stickney, Roman L. Weil, Katherine Schipper, Jennifer Francis
Posted Date:
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