You just received an email from your boss stating that as a reward for your hard work,
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You just received an email from your boss stating that as a reward for your hard work, the firm has promised to pay you $20,000 at the end of their calendar year. Provide a specific equation with all of the necessary inputs that should be used to estimate the current value of this promised payment (assume a valuation date of March 31, 2020). Assume the firm’s asset beta equals 1.0, their debt beta equals 0.4, their equity beta equals 1.2, the market rate on the one-year Treasury Bond is 0.17%, and the expected return on the equity market (Rm) is 8%/year. Explain the reasoning behind the logic of your method.
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