ABC Ltd., has a total market value of Rs.18 million. The debt of the company,...
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ABC Ltd., has a total market value of Rs.18 million. The debt of the company, which is composed of pure discount bonds, has a face value of Rs.8 million with a maturity of 5 years. The companys standard deviation of return is 0.50 and the risk free rate of return is 10 percent.
Required;
- Using the Black-scholes option valuation model, determine the market value of ABC s equity capital.
- Market price of equity per share if share outstanding are 800,000 shares.
- What is the current market value of companys debt.
- Compute the interest rate on bonds (yield to maturity)
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