Question: Markus Co is a manufacturing firm, Markus Co.'s current value of operations, including debt and equity, is estimated to be $30 million Markus Co has

 Markus Co is a manufacturing firm, Markus Co.'s current value of
operations, including debt and equity, is estimated to be $30 million Markus

Markus Co is a manufacturing firm, Markus Co.'s current value of operations, including debt and equity, is estimated to be $30 million Markus Co has $12 million face-value zero coupon debt that is due in five years. The risk free rate is 6% and the volatility of companies similar to Markus Ca. 15 50%. Markus Co's performance has not been very good as compared to previous years. Because the company has debt, it will repoy les loan, but the company has the option of not paying equity holders. The ability to make the decision of whether to pay or not looks very much like an option Based on your understanding of the Black-Scholes option pricing model (OPM), calculate the following values and complete the table. (Note Use 2.7183 as the approximate value of e in your calculations. Also, do not round intermediate calculations. Round your answers to two decimal places) Markus Co. Value (Millions of dollars) Equity value Debt value Debt yield Markus Co.'s management is implementing a risk management strategy to reduce its volatility. Complete the following table, assuming that the goals to reduce Markus Co s volatility to 30%. Markus Co. Goal (Millions of dollars) Equity value at 30% volatility Debt value at 30% volatility Debt vield at 30% volatility Complete the following sentenco, assuming that Mukus o'sisk management strategy is successful and the value If its risk management strategy is successful and Markus Cocan reduce its volatility, the value of Markus Cos debt will of its stock wil

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