Suppose a fiRm Has a Total Market Value of $900

question 279

Multiple Choice

Suppose a firm has a total market value of $900 and outstanding debt with a face value of $850. The risk-free rate of interest is 6%. If the firm will have a value of either $650 or $900 next period,
What is the value of the debt in the firm?

• A) $782.59
• B) $788.92
• C) $792.64
• D) $800.00
• E) $842.64

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