In Order to Accurately Assess the Capital Structure of a Firm

question 9

Multiple Choice

In order to accurately assess the capital structure of a firm, it is necessary to convert its balance sheet figures to a market value basis. KJM Corporation's balance sheet as of today is as follows: The bonds have a 4.0% coupon rate, payable semiannually, and a par value of $1,000. They mature exactly 10 years from today. The yield to maturity is 12%, so the bonds now sell below par. What is the current market value of the firm's debt?

• A) $5,276,731
• B) $5,412,032
• C) $5,547,332
• D) $7,706,000

---

Definitions:

Right Of Inspection

A buyer's privilege to examine goods before finalizing a purchase to confirm they meet the agreed standards and specifications.

Corporate Articles

Official documents filed with a governmental body to legally document the formation of a corporation.

Four-Year Period

A specified duration of time encompassing four consecutive years, often referenced in contracts, warranties, or statutes of limitation.

Decade

A period of ten years.