Tescacs assets are worth $300. It has $180 of zero-coupon debt outstanding that is due to be

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Tescac’s assets are worth $300. It has $180 of zero-coupon debt outstanding that is due to be repaid at the end of three years. The risk-free interest rate is 5%, and the standard deviation of the returns on Tescac’s assets is 50% per year.
A. What is the value of the put option owned by shareholders?
B. What is the value of the company’s debt?
C. What is the value of the company’s equity?

Posted Date: Nov 16, 2021 02:25 AM

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Tescacs assets are worth $300. It has $180 of zero-coupon debt outstanding that is due to be

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A The value of the put option is simply the present value of ... View the full answer

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