Question: I ONLY NEED B AND C. c should be a written graph. thank u Suppose company ABC will be worth either 250 M or 150
Suppose company ABC will be worth either 250 M or 150 M depending on whether the economy is strong (with 60% probability) or weak (with 40% probability) in one year, t-1. The current risk-free rate is 49 and the cost of equity if the company is 100% equity financed is 15%. Assume perfect world. a. (4 points) What is the maximum amount ABC can borrow (at t-) under 4% Interest rate? Calculate and explain briefly b. (4 points) What would be the company's debt-to-value ratio of ABC borrows the amount you found in a) (10 points) Determine interest rate (cost of debt) at which ABC could borrow $150 M d. (6 points) on the debt-to-value-ratio (as x) and Expected rate of return (as 7) plane draw graphs of twaco e, and rd. Be specific On the graph please indicate all the known values of twaco Fe, and to indicate D/V value after which ry starts to increase Suppose company ABC will be worth either 250 M or 150 M depending on whether the economy is strong (with 60% probability) or weak (with 40% probability) in one year, t-1. The current risk-free rate is 49 and the cost of equity if the company is 100% equity financed is 15%. Assume perfect world. a. (4 points) What is the maximum amount ABC can borrow (at t-) under 4% Interest rate? Calculate and explain briefly b. (4 points) What would be the company's debt-to-value ratio of ABC borrows the amount you found in a) (10 points) Determine interest rate (cost of debt) at which ABC could borrow $150 M d. (6 points) on the debt-to-value-ratio (as x) and Expected rate of return (as 7) plane draw graphs of twaco e, and rd. Be specific On the graph please indicate all the known values of twaco Fe, and to indicate D/V value after which ry starts to increase
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