A firm has 65% probability of being worth $100 million and a 35% probability of being worth

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A firm has 65% probability of being worth $100 million and a 35% probability of being worth $130 million. There is one bond outstanding that promises to pay $100 million at an interest rate of 7%. The cost of capital for the firmʹs projects is 9%.

What are the current proportions of debt and equity financing used by the firm?

Related Book For answer-question

Fundamentals of Corporate Finance

ISBN: 978-0077861629

8th edition

Authors: Richard Brealey, Stewart Myers, Alan Marcus

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Posted Date: May 12, 2023 02:08 AM

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A firm has 65% probability of being worth $100 million and a 35% probability of being worth

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firm To determine the proportions of debt and equity financing used by the firm we first need to cal... View the full answer

Fundamentals of Corporate Finance

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