13. Suppose a firm has a total market value of $900 and outstanding debt with...
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13. 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 rate of return on the firm's debt? (Assume the bond makes no coupon payments during this time period.) A. 0.9% B. 6.7% C. 7.2% D. 6.81% I E. 8.1% 14. Suppose a firm has a current 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 equity in the firm? A. $0.00 B. $53.70 C. $57.36 D. $67.41 E. $89.65
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