Corporate FInace Assignment/ Professional Essay Writers
1. A firm has a capital structure that includes equity and debt. The payoffs at the end of the year to bondholders and equity holders depend on whether the company goes bankrupt. If the firm goes bankrupt, the bondholders receive £55 million and equity holders receive nothing. If the firm survives, the bondholders receive £100 million and equity holders receive £60 million. The firm’s beta is zero, the risk-free rate is 5 percent, and there is a 5 percent chance of bankruptcy. What is the total value of the firm’s securities at the beginning of the year (to one decimal place)?
A) None of the answers below.
B) £147.1 million.
C) £147.6 million.
D) £147.4 million.
2. The film ABC has an overall firm beta of 1 and a debt beta of 0.25. The debt to equity ratio (D/E) is 0.25. What is the equity beta (to one decimal place)?
D) None of the answers above. Get Finance Help Today