XYZ Corporation has $ 5 0 0 million in zero coupon debt outstanding, due in five years.
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Question:
XYZ Corporation has $ million in zero coupon debt outstanding, due in five years. The firm had earnings before interest and taxes of $ million in the most recent year the tax rate is These earnings are expected to grow a year in perpetuity, and the firm paid no dividends. The firm had a return on capital of and a cost of capital of The annualized standard deviation in firm values of comparable firms is The fiveyear bond rate is
a Estimate the value of the firm.
b Estimate the value of equity, using an option pricing model.
c Estimate the market value of debt and the appropriate interest rate on the debt.
Related Book For
Equity Asset Valuation
ISBN: 978-0470571439
2nd Edition
Authors: Jerald E. Pinto, Elaine Henry, Thomas R. Robinson, John D. Stowe, Abby Cohen
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