Question: Onlyland Inc. has only one asset - a plot of vacant land. Onlyland inc, also has only one liability - debt of $15 million due
Onlyland Inc. has only one asset - a plot of vacant land. Onlyland inc, also has only one liability - debt of $15 million due in one year, If left vacant, the land wil be worth $12 million in ene year. Alternatively, Onlyland can develop the land at an upfront cost of $20mill on. The developed land will be worth $37.5 million in one year. 5uppose the risk.free interest rate is 2%, assume all cash flows are risk.free, and assume there are no taxes. a. If the firm chooses not to develop the land, the value of the firm's equity today is $ million. (Input number only as your answer. Round it to the nearest whole number.) The value of the firm's debt today is 1 million. (input number only as your answer. Round it to the nearest whole number.) b. Suppose the firm raises $20 million from equity holders to develop the land. If the firm develops the land, the value of the firm's equity is $ million. (Input number only as your answer. Round it to the nearest whole number.) The value of the firm's debt today is $ million. (Input number only as your answer. Round it to the nearest whole number.) c. If equity hoiders decide not to develop the land, the agency cost \{value destroyed) is : milion. (Input number only as your answer. Round it to the nearest whole number.)
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