At What Level of Firm Value Will Equity Begin to Receive

question 48

Multiple Choice

At what level of firm value will equity begin to receive a payoff if the firm consists of equity and a single zero coupon bond with a promised payoff of $100 million?

• A)when the value exceeds $50 million
• B)when the value exceeds $100 million
• C)when the value exceeds $10 million
• D)This cannot be answered without knowing the relative percentages of debt and equity financing.

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