Buckeye Industries Has a Bond Issue with a Face Value

question 96

Multiple Choice

Buckeye Industries has a bond issue with a face value of $1,000 that is coming due in one year.The value of Buckeye's assets is currently $1,350.Jim Tressell,the CEO,believes that the assets in the firm will be worth either $600 or $1,700 in a year.The going rate on one-year T-bills is 6 percent.What is the current value of the firm's debt?

• A)$601.18
• B)$851.11
• C)$864.24
• D)$878.78
• E)$911.03

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